RBI raises lending capacities of Micro Finance Institutions

RBI in its Statement on Developmental and Regulatory Policies announced, on Friday, October 4, 2019, raising the household income limit for borrowers of NBFC-MFIs from the current level of ₹ 1.00 lakh for rural areas and ₹ 1.60 lakh for urban/semi-urban areas to ₹ 1.25 lakh and ₹ 2.00 lakh, respectively.
The Y.H.Malegam sub-committee of Central Board of the Reserve Bank had recommended creating a separate category of NBFC, viz., Non-Banking Financial Company-Micro Finance Institution (NBFC-MFI). RBI put in place a separate category NBFC-MFI in December 2011 as recommended by the Malegam committee with a detailed regulatory framework. The income and loan limits to classify an exposure as an eligible asset for NBFC-MFI were last revised in 2015.
In its press release, RBI said, “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, it is proposed to revise these criteria”. RBI communiqué also said that the detailed guidelines in this regard will be issued shortly.