After all, market discipline is the first line of defense for all bank supervisors. Recent efforts by U.S. bank supervisors to augment market discipline have focused on increased disclosure in order to improve the transparency of depositories. For example, disclosures are a core element of the proposal for a new Basel accord. However, in my judgment the current proposal needs some refining.
The protection of small borrowers has been enshrined in the NBFC-MFI regulations which do not permit more than two NBFC-MFIs to lend to the same borrower. Besides, there is a regulatory ceiling on the maximum amount that can be lent by an NBFC-MFI to a microfinance borrower.