ABSTRACT
This chapter provides a brief review of recent developments in the Indian microfinance industry, and discusses the current issues and challenges. Microfinance is providing financial services to low-income individuals who lack access to the conventional banking sector. Microfinance has the potential to fill the critical gap left by formal financial institutions in providing financial services to low-income groups. It is argued that microfinance can facilitate the achievement of the Millennium Development Goals, as well as national policies, that target poverty reduction and women empowerment, supporting vulnerable groups and improving standards of living. Based on the recommendations of the Malegam Committee, the Reserve Bank of India (RBI) has issued detailed guidelines, permitting bank lending to eligible microfinance companies as priority sector advance, which is statutory requirement for banks. The RBIs approach to financial inclusion is aimed at connecting people with the mainstream financial institutions.
