Income threshold to avail microfinance increased

Lending limit per borrower also raised from ₹1 lakh to ₹1.25 lakh

Updated - October 05, 2019 04:59 am IST

Published - October 04, 2019 10:26 pm IST - Mumbai

Representational image. File

Representational image. File

In a move that will enable more borrowers to avail loans from microfinance institutions (MFI), the Reserve Bank of India has decided to raise the household income limit of borrowers to ₹2 lakh for urban and semi urban areas from ₹1.6 lakh.

For rural areas, the limit has been increased from ₹1 lakh to ₹1.25 lakh. Loans by MFIs to such borrowers are uncollateralised.

This will mean that all the borrowers having an household income of ₹2 lakh in urban/semi urban areas and ₹1.25 lakh in rural areas will be eligible for loans from MFIs, which are uncollateralised.

The lending limit per borrower has also been hiked from ₹1 lakh to ₹1.25 lakh.

The RBI said the decision was taken after taking into consideration the important role played by MFIs in delivering credit to those at the bottom of the economic pyramid and enable them to play their assigned role in a growing economy. “This is a good move reflecting the change in household income since 2015 and allows clients to avail higher loan amounts from RBI-regulated... institutions,” said Manoj Nambiar, chairperson, Microfinance Institutions Network.

“This change will provide more room to NBFC-MFIs to lend and allow more households access to credit. Microfinance lenders will use this increased limit to continue to lend to the over 50 million borrowers,” Mr. Nambiar added.

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