Indian Central Bank Modifies Rules Governing Non-Bank Financial Company - Micro-Finance Institutions
| Date Published | 8/7/2012 |
| Author | Reserve Bank of India |
| Theme | |
| Country | India |
On December 2, 2011, the Reserve Bank of India issued a regulatory framework
governing Non-Banking Financial Company - Micro Finance Institutions- a new
category of financial institution. In light of comments received about the
difficulties in complying with the framework, certain modifications were made
including:
-Changes in the calculation of
net-owned funds and in the criteria for Qualifying Assets
-An easing of the requirement that income generation activities should
constitute 75 percent of total loans to 70 percent (leaving 30 percent for
other purposes including house repair, etc.)
-Clarification that a borrower or
group cannot borrow from more than 2 MFIs
-Affirmation that rules on maximum debt exposure of Rs. 50,000 or
roughly USD 1,000 remain in place
-Lifting of the interest cap of 26 percent in favor of a maximum
variance of 4 percent between maximum and minimum rates on individual loans and
a cap on margins of 10 to 12 percent
In addition all MFIs need to adhere to the Fair Practice Code issues by the
RBI on July 2, 2012.
[Link to modified regulation]
[Link to December 2011 regulation article]