The Reserve Bank of India has increased eligibility criteria for microfinance loans to a household having an annual income of up to Rs 3 lakh and also removed the interest rate cap on such loans. RBI has also asked all the lenders to implement a board-approved policy on pricing.
In the final guidelines released for microfinance loans, the Reserve Bank of India has said that it will scrutinize the rates which will be charged by lenders to avoid usurious rates, further it has asked the lenders to establish a ceiling on the pricing of loans and related fees.
It is mandatory for all microfinance institutions to disclose completed information related to pricing to the prospective borrower in a standardized simplified fact sheet. In addition to that, RBI has also asked them to show the minimum, maximum, and average interest rates charged on loans in all its offices as well as on their official website.
The Reserve Bank of India has said, “All collateral-free loans, irrespective of end use and mode of application/processing/disbursal, provided to low-income household having annual income up to Rs 300,000, shall be considered as microfinance loans.”
