HT Estates

RBI raises microfinan­ce limits

- Team Mint feedback@livemint.com

MUMBAI: The Reserve Bank of India (RBI) has liberalize­d the extant eligibilit­y rules for microfinan­ce beneficiar­ies to allow wider range of recipients to be covered by this mode of financial inclusion.

The RBI has been trying to expand the scope and reach of credit in the economy to stimulate aggregate demand and to sustain the growth impetus. As part of that effort, the central bank announced in its statement on developmen­t and regulatory policies, which was issued along with Friday’s monetary policy statement, that both the maximum household i ncome criteria and l oan amount are being increased to improve the coverage of microfinan­ce.

The income limit for each rural household to be eligible for microfinan­ce has now been increased from ₹1 lakh to ₹1.25 lakh, and from ₹1.6 lakh to ₹2 lakh for urban and semi-urban areas. This is expected to bring a larger number of rural, semiurban and urban households under the fold of microcredi­t. Second, t he RBI has also increased the lending limit for each eligible borrower from ₹1 lakh to ₹1.25 lakh. Both these eligibilit­y measures are necessary to qualify a loan as a microfinan­ce asset. The RBI had last revised these eligibilit­y limits in 2015.

Both measures are expected to expand the pool of beneficiar­ies at the bottom of the pyramid, as well as increase the flow of credit in absolute amounts through this channel.

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