Reserve Bank of India releases a Consultative Document on Regulation of Microfinance | Daily Current Affairs 2021
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Reserve Bank of India releases a Consultative Document on Regulation of Microfinance

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Consultative Document on Regulation of Microfinance

Reserve Bank of India (RBI) recently released a Consultative Document on Regulation of Microfinance.

Details:

  • It has been released for harmonizing the regulatory frameworks for various regulated lenders in the microfinance space.
  • The key proposals of the Consultative Document are enumerated below:
  1. A common definition of microfinance loans for all regulated entities.
  2. Capping the outflow on account of repayment of loan obligations of a household to a percentage of the household income.
  3. A Board approved policy for household income assessment.
  4. Introduction of a standard simplified fact sheet on the pricing of microfinance loans for better transparency.
  5. No pre-payment penalty; no requirement of collateral; and greater flexibility of repayment frequency for all microfinance loans.
  6. Alignment of pricing guidelines for the non-banking financial company – micro finance institutions (NBFC-MFIs) with guidelines for NBFCs.
  7. Display of minimum, maximum and average interest rates charged on microfinance loans on the websites of regulated entities.

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