Reserve Bank of India (RBI) once again made announcements regarding the regulatory framework on microfinance loans. 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, as far as the limit was concerned, there was a limit on the charge per unit charged by microfinance lenders. The most rate of interest was 10-12% above the price of funds incurred by the institution or 2.75 times the common interest rate of the five-largest commercial banks, whichever is lower. Now, the removal of margin caps brings NBFC-MFIs to the identical level as other lenders like banks. This can pave the way for the underwriting of loans supported risk analysis. Also, betting on the borrower, a risk premiu...
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