When the demands for regulating the Micro Finance Institutions were made, Shri Jagdish Capoor, the then Deputy Governor, stated in 2001 “As MFIs are significantly different from commercial banks both in terms of institutional structure and product portfolio, application of the same set of regulatory and prudential guidelines to MFIs, in our view, not only runs the risk of distorting the emerging market but it may also reduce the efficiency of these institutions”.
When the demands gained momentum by 2005, the then Governor, Dr YV Reddy stated in August 2005, “Microfinance movement across the country involving common people has benefited immensely by its informality and flexibility. Hence, their organisation, structure and methods of working should be simple and any regulation will be inconsistent with the core-spirit of the movement”.