Economy

RBI increases lending limit of MFIs to ₹1.25 lakh

The Reserve Bank of India has raised the lending cap for microfinance institutions to ₹1.25 lakh, against the earlier limit of ₹1 lakh, to improve credit availability in rural and semi-urban areas.

It has also been decided to “increase the household income limit for borrowers of non-banking financial companies-micro finance institutions (NBFC-MFIs) from the current level of ₹1 lakh for rural areas and ₹1.60 lakh for urban/semi urban areas to ₹1.25 lakh and ₹2 lakh, respectively.”

Taking into consideration the important role played by MFIs in delivering credit to those in the bottom of the economic pyramid and enable them to play their assigned role in a growing economy, the Reserve Bank of India (RBI) observed in its Statement on Developmental and Regulatory Policies.

The income and loan limits to classify an exposure as an eligible asset were last revised in 2015.

Detailed guidelines in this regard will be issued shortly, the central bank said.

It is to be noted that the a sub-committee of the central board of the Reserve Bank under the chairmanship of Y.H. Malegam was constituted to study issues and concerns in the sector in the wake of the Andhra Pradesh micro finance crisis in 2010.

Based on the recommendations of the committee, it was decided to create a separate category of NBFC-MFI and a detailed regulatory framework for NBFC-MFIs was put in place in December 2011.

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Printable version | Jun 5, 2020 4:03:56 PM | https://www.thehindu.com/business/Economy/rbi-increases-lending-limit-of-mfis-to-125-lakh/article29594977.ece

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