Sakshi Education
- On 14th March Reserve Bank of India (RBI) 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. This will pave the way for the underwriting of loans based on risk analysis. Also, depending on the borrower, a risk premium can be charged by the lenders.
Published date : 17 Mar 2022 05:53PM
