RBI seeks same micro fin rules for banks, NBFCs


Mumbai: The RBI has proposed to remove pricing restrictions for microfinance institutions (MFIs) in a report that reviewed regulations for the sector. The report has proposed a uniform definition for microfinance loans for banks, MFIs, and non-banking finance companies (NBFCs), and said that lending to a household should be capped in relation to its income.
Other proposals include doing away with pre-payment penalty and collaterals for loans to households with annual income of Rs 1.25 lakh and Rs 2 lakh for rural and urban areas, respectively. If the recommendations are accepted, lenders will have to disclose pricing in a standard simplified fact sheet.
“In having a common definition of microfinance loans for all regulated entities, it will ensure a level playing field, making it entity-agnostic as done by MFIN as part of its voluntary Code of Responsible Lending (CRL). The focus on responsibility on boards promoting good governance and sound operational policies is a welcome step,” said Alok Mishra, CEO and director of MFIN — an association of micro lenders.
“The suggested framework in the consultative document is intended to be made applicable to the microfinance loans provided by all entities regulated by the RBI and is aimed at protecting borrowers from over-indebtedness as well as enabling competitive forces to bring down the interest rates by empowering the borrowers to make an informed decision,” the RBI said in a statement.


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