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Building capital buffers, managing liquidity crucial for MFIs: RBI article

Building capital buffers, managing liquidity crucial for MFIs: RBI article

Finance
MUMBAI: As COVID-19 is likely to pose financial risks for microfinance institutions (MFIs), there is a need to build capital buffers and manage cash positions for micro lenders to protect their balance sheets from any disruptions, according to an article published in RBI's monthly bulletin. The article, prepared by Snimardeep Singh of Department of Supervision, Reserve Bank of India, said though COVID-19 presents new challenges and significant financial risks for the microfinance sector, it also presents an opportunity to build long-term resilience. "Going forward, building capital buffers and managing liquidity would be crucial for MFIs in fortifying their balance sheets against COVID-19 led disruptions," it said. The article termed COVID-19 as the biggest tail risk event in a long time. ...