Lending limits for NBFC-MFIS hiked

In support of improving the credit availability to the deep rural pockets, the Reserve Bank of India (RBI) eased lending-related restrictions for non-banking financial service-micro finance institutions (NBFC-MFIS).

The central bank increased the household income limit for NBFC

MFI borrowers from the existing ~1 lakh to ~1.25 lakh and from ~1.6 lakh to ~2 lakh for rural areas and for urban/semi-urban areas, respectively. Besides, per borrower lending limits for NBFC-MFI raised to ~1.25 lakh from currently ~1 lakh. The existing loan and income limits were last revised in 2015.

“....Micro finance institutions play an important role in delivering credit to those in the bottom of the economic pyramid. These measures are expected to boost MFI lending to the bottom of the economic pyramid,” RBI Governor Shaktikanta Das said.

According to the RBI data, there are 95 NBFC-MFIS as of August 2019. According to the Micrometer report by Microfinance Institution Network, or MFIN, NBFC-MFIS accounted for about 30 per cent of total micro finance credit of ~1.9 trillion as of June 2019. MFIN is the industry body for NBFCMFIS in India.

The announcement by the RBI is very positive for rural areas. Increased lending limits is expected to help enhance momentum in rural areas and revival of rural economy to some extent, says Udaya Kumar Hebbar, MD and CEO, Credit-access Grameen. He also believes that these announcements are in line with inflation and rise in loan requirement by customers.

In light of rising demand for micro credit, the increased lending limits by the RBI gives more room for lenders to lend.

Per borrower lending limits for NBFC-MFI raised to ~1.25 lakh from currently ~1 lakh