Reserve Bank of India raises lending limit of MFIs to Rs 1.25 lakh
   Date :06-Oct-2019
 
Business Bureau :
 
THE Reserve Bank of India has raised the lending cap for microfinance institutions to Rs 1.25 lakh, against the earlier limit of Rs 1 lakh, to improve credit availability in rural and semi-urban areas. It has also been decided to “increase the household income limit for borrowers of non-banking financial companies-micro finance institutions (NBFC-MFIs) from the current level of Rs 1 lakh for rural areas and Rs 1.60 lakh for urban/semi urban areas to Rs 1.25 lakh and Rs 2 lakh.
 
Taking into consideration the important role played by MFIs in delivering credit to those in the bottom of the economic pyramid and enable them to play their assigned role in a growing economy, the Reserve Bank of India (RBI) observed in its Statement on Developmental and Regulatory Policies. The income and loan limits to classify an exposure as an eligible asset were last revised in 2015. Detailed guidelines in this regard will be issued shortly, the central bank said. It is to be noted that the a sub-committee of the central board of the Reserve Bank under the Chairmanship of Y H Malegam was constituted to study issues and concerns in the sector in the wake of the Andhra Pradesh micro finance crisis in 2010.
 
Based on the recommendations of the committee, it was decided to create a separate category of NBFC - non-banking financial company-microfinance institution (NBFC-MFI) - and a detailed regulatory framework for NBFC-MFIs was put in place in December 2011. It further said that the RBI has been taking steps for popularising cross-border transactions in Indian rupee, especially in respect of external commercial borrowing (ECB), trade credit and exports and imports, thereby reducing the exchange risk for persons residing in India.
 
RBI said that it has been decided, in consultation with the Government of India, to enhance the scope of non-interest bearing special non-resident rupee (SNRR) account by permitting persons residing outside India to open accounts to facilitate rupee denominated ECB, trade credit and trade invoicing. “Further, restriction on the tenure of SNRR account, which is currently seven years, is also proposed to be removed for the aforesaid purposes. Guidelines in this regard would be issued within a month,” it said.