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Regulatory Framework on microfinance loans
April 18 , 2022
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- Reserve Bank of India announced Regulatory Framework on microfinance loans.
- The Reserve Bank of India (RBI) has done away with the margin caps on the pricing of small loans given by non-banking financial company-microfinance institutions (NBFC-MFIs).
- Earlier, there was a limit on the interest rate charged by microfinance lenders.
- The maximum interest rate was 10-12% above the cost of funds incurred by the institution or 2.75 times the average base rate of the five-largest commercial banks, whichever is lower.
- Now, the removal of margin caps brings NBFC-MFIs to the same level as other lenders such as banks.
- Also, the annual household income, to be eligible to avail of microfinance level has been raised to ₹3 lakh.
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