Taking loans from microfinance institutions (microfinance lenders) and non-banking financial companies (NBFCs) may become easier and cheaper in the coming days. For this, the Reserve Bank has proposed a new regulatory framework for the country’s microfinance institution. Accordingly, no penalty will be levied on the prepayment of the loan. Also, the borrowers will not have to keep any kind of collateral. It is believed that this will also make it easier for microfinance institutions to disburse loans.
In a draft resolution related to regulation, the Reserve Bank has advised that a definition of micro finance loans (MFIs) of all regulated entities will be fixed. According to this proposal of RBI, there will be no cap on the interest rate for these. Or charge more interest.
no interest rate limit
At present, there is a fixed minimum and maximum limit of interest rate for micro finance institutions. It is assessed according to the rules of the Reserve Bank. But according to the proposal, there will be no interest rate limit in the new regulation. Experts say customers with better records will benefit as they may be offered lower interest rates. Whereas at present they cannot offer interest less than a limit.
loan without guarantee
The Reserve Bank has said in the draft resolution that microfinance loans mean loans without collateral or guarantee. According to the proposal, people whose annual income ranges from Rs 1.25 lakh to Rs 2 lakh per annum can take microfinance loans. The central bank also said that people living in rural and urban areas should be able to get such loans easily. At present, microfinance disburses loans ranging from Rs 10,000 to Rs 5 lakh.
EMI is only 50% of the income
According to the document, one cannot be forced to repay more than 50 per cent of one’s total income in case of repayment on all existing loans. That is, according to the amount of your income, the total EMI can be only 50 percent of it. Experts say that at present, microfinance institutions charge 70 to 80 percent EMI from customers.