{"id":29270,"date":"2022-03-14T19:38:45","date_gmt":"2022-03-14T14:08:45","guid":{"rendered":"https:\/\/tradebrains.in\/features\/biz-rbi-ld-microfinance\/"},"modified":"2022-03-14T19:38:45","modified_gmt":"2022-03-14T14:08:45","slug":"biz-rbi-ld-microfinance","status":"publish","type":"post","link":"https:\/\/tradebrains.in\/features\/biz-rbi-ld-microfinance\/","title":{"rendered":"RBI allows MFIs to fix interest rates"},"content":{"rendered":"<div class=\"trade-content_2\" style=\"margin-left: auto;margin-right: auto;text-align: center;\" id=\"trade-1534722626\"><p><a href=\"https:\/\/tradebrains.in\/get\/telegram\/\"><img decoding=\"async\" class=\"alignnone wp-image-101992\" src=\"https:\/\/tradebrains.in\/features\/wp-content\/uploads\/2023\/01\/telegram-channel-300x119.png\" alt=\"\" width=\"148\" height=\"59\" \/><\/a> <a href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMN3Epgswxc--Aw?hl=en-IN&amp;gl=IN&amp;ceid=IN%3Aen\"><img decoding=\"async\" class=\"alignnone wp-image-123430\" src=\"https:\/\/tradebrains.in\/features\/wp-content\/uploads\/2024\/05\/follow-on-google-news-300x82.png\" alt=\"follow-on-google-news\" width=\"222\" height=\"61\" srcset=\"https:\/\/tradebrains.in\/features\/wp-content\/uploads\/2024\/05\/follow-on-google-news-300x82.png 300w, https:\/\/tradebrains.in\/features\/wp-content\/uploads\/2024\/05\/follow-on-google-news-150x41.png 150w, https:\/\/tradebrains.in\/features\/wp-content\/uploads\/2024\/05\/follow-on-google-news.png 468w\" sizes=\"(max-width: 222px) 100vw, 222px\" \/><\/a><\/p>\n<\/div><p>Mumbai, Mar 14 (PTI) The Reserve Bank of India (RBI) on Monday allowed microfinance lenders to fix interest rates on loans with a rider that those should not be usurious for the borrowers.<\/p><div class=\"trade-content_7\" style=\"margin-left: auto;margin-right: auto;text-align: center;\" id=\"trade-243867741\"><!-- Composite Start --> \r\n <div id=\"M923760ScriptRootC1549812\"> \r\n <\/div> \r\n <script src=\"https:\/\/jsc.mgid.com\/t\/r\/tradebrains.in.1549812.js\" async> \r\n <\/script> \r\n <!-- Composite End --><\/div>\n<p> A microfinance loan is defined as a collateral-free loan given to a household having an annual income of up to Rs 3 lakh.<\/p>\n<p> Each regulated entity (RE) should put in place a board-approved policy regarding pricing of microfinance loans, said the &#8216;Master Direction \u2013 Reserve Bank of India (Regulatory Framework for Microfinance Loans) Directions, 2022&#8217;.<\/p>\n<p> In the past, the central bank used to announce the rates on quarterly basis.<\/p><div class=\"trade-content_5\" id=\"trade-259261404\"><script async src=\"https:\/\/pagead2.googlesyndication.com\/pagead\/js\/adsbygoogle.js?client=ca-pub-4023722985638610\"\r\n     crossorigin=\"anonymous\"><\/script>\r\n<!-- in_content_2_news -->\r\n<ins class=\"adsbygoogle\"\r\n     style=\"display:block\"\r\n     data-ad-client=\"ca-pub-4023722985638610\"\r\n     data-ad-slot=\"7925020301\"\r\n     data-ad-format=\"auto\"\r\n     data-full-width-responsive=\"true\"><\/ins>\r\n<script>\r\n     (adsbygoogle = window.adsbygoogle || []).push({});\r\n<\/script><\/div>\n<p> &#8220;Interest rates and other charges\/ fees on microfinance loans should not be usurious. These shall be subjected to supervisory scrutiny by the Reserve Bank,&#8221; it said.<\/p>\n<p> Also, each RE has to disclose pricing-related information to a prospective borrower in a standardised simplified factsheet.<\/p>\n<p> &#8220;Any fees to be charged to the microfinance borrower by the RE and\/ or its partner\/agent shall be explicitly disclosed in the factsheet. The borrower shall not be charged any amount which is not explicitly mentioned in the factsheet,&#8221; it added.<\/p>\n<p> The directions will come into force from April 1.<\/p>\n<p> Further, there should be no pre-payment penalty on microfinance loans.<\/p>\n<p> &#8220;Penalty, if any, for delayed payment shall be applied on the overdue amount and not on the entire loan amount,&#8221; the RBI said.<\/p><div class=\"trade-content-10\" id=\"trade-2355504971\"><script async src=\"https:\/\/pagead2.googlesyndication.com\/pagead\/js\/adsbygoogle.js?client=ca-pub-4023722985638610\"\r\n     crossorigin=\"anonymous\"><\/script>\r\n<!-- in_content_3_news -->\r\n<ins class=\"adsbygoogle\"\r\n     style=\"display:block\"\r\n     data-ad-client=\"ca-pub-4023722985638610\"\r\n     data-ad-slot=\"2969612066\"\r\n     data-ad-format=\"auto\"\r\n     data-full-width-responsive=\"true\"><\/ins>\r\n<script>\r\n     (adsbygoogle = window.adsbygoogle || []).push({});\r\n<\/script><\/div>\n<p> Regarding limit on loan repayment obligations of a household, it said each RE should have a board-approved policy regarding the limit on the outflows on account of repayment of monthly loan obligations of a household as a percentage of the monthly household income.<\/p>\n<p> &#8220;This shall be subject to a limit of maximum 50 per cent of the monthly household income,&#8221; it said.<\/p>\n<p> There should also be a standard form of loan agreement for microfinance loans in a language understood by the borrower.<\/p>\n<p> Under the earlier guidelines, an NBFC that does not qualify as a non-banking financial company &#8211; microfinance institution (NBFC-MFI), cannot extend microfinance loans exceeding 10 per cent of its total assets.<\/p>\n<p> The maximum limit on microfinance loans for such NBFCs (NBFCs other than NBFC-MFIs) now stands revised at 25 per cent of the total assets.<\/p>\n<p> In December 2021, RBI had fixed the applicable average base rate to be charged by NBFC-MFIs to their borrowers for the quarter beginning January 1, 2022 at 7.89 per cent.<\/p>\n<p> MFIN, the association for microfinance entities has welcomed the harmonised regulations for the sector announced by RBI.<\/p>\n<p> Commenting on the regulation, Alok Misra, CEO and Director, MFIN said the harmonised regulations will usher in a new era\/beginning for the microfinance sector where a common regulatory framework will be applicable to all REs of RBI.<\/p>\n<p> &#8220;Besides creating a level playing field, the framework will address issues of over indebtedness and multiple lending which were of paramount concerns for the sector,&#8221; Misra said.<\/p>\n<p> Udaya Kumar Hebbar, MD and CEO at CreditAccess Grameen said the revision of the income cap to Rs 3 lakh will expand the market opportunity and interest rate cap removal will promote risk-based underwriting.<\/p>\n<p> &#8220;This reflects the confidence shown by the central bank in the ability of MFIs to responsibly cater to the bottom of the pyramid,&#8221; Hebbar said. PTI NKD CS  NKD ANU ANU<\/p>\n<div class=\"trade-after-content\" id=\"trade-2409610011\"><div id=\"taboola-below-article-thumbnails\"><\/div>\r\n<script type=\"text\/javascript\">\r\n  window._taboola = window._taboola || [];\r\n  _taboola.push({\r\n    mode: 'alternating-thumbnails-a',\r\n    container: 'taboola-below-article-thumbnails',\r\n    placement: 'Below Article Thumbnails',\r\n    target_type: 'mix'\r\n  });\r\n<\/script>\r\n<script type=\"text\/javascript\">\r\n  window._taboola = window._taboola || [];\r\n  _taboola.push({flush: true});\r\n<\/script><\/div>","protected":false},"excerpt":{"rendered":"<p>Mumbai, Mar 14 (PTI) The Reserve Bank of India (RBI) on Monday allowed microfinance lenders to fix interest rates on loans with a rider that those should not be usurious for the borrowers. A microfinance loan is defined as a collateral-free loan given to a household having an annual income of up to Rs 3 [&hellip;]<\/p>\n","protected":false},"author":13,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[31],"tags":[],"class_list":["post-29270","post","type-post","status-publish","format-standard","hentry","category-news"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v20.5 (Yoast SEO v25.0) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>RBI allows MFIs to fix interest rates - Trade Brains Features<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/tradebrains.in\/features\/biz-rbi-ld-microfinance\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"RBI allows MFIs to fix interest rates\" \/>\n<meta property=\"og:description\" content=\"Mumbai, Mar 14 (PTI) The Reserve Bank of India (RBI) on Monday allowed microfinance lenders to fix interest rates on loans with a rider that those should not be usurious for the borrowers. 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