MFIs can lend more to small borrowers

MUMBAI: Small borrowers can now avail loans amounting to Rs 1.25 lakh from

microfinance institutions

(

MFIs

) as against Rs 1 lakh earlier.


RBI on Friday also hiked the lending limit for individual borrowers and allowed MFIs to lend to households with a higher income than before. As against a household income cap of Rs 1 lakh and Rs 1.6 lakh respectively for rural and urban borrowers, MFIs can lend to those with income up to Rs 1.25 lakh and Rs 2 lakh respectively.

“There is a realisation that the needs have gone up and an increase in the limit will help those looking at setting up an enterprise,” said

Fusion Microfinance

CEO and founder Devesh Sachdev.

He added that this will help in formalisation as over 85% of the borrowers now have a bank account and get money into those accounts.

According to Sachdev, although the amount has been a ceiling for some, for lenders the sweet spot has been loans in the Rs 25,000-60,000 range. “This will specifically help MFIs that have been around longer and have customers who have borrowed for several cycles. As there might be borrowers to whom they are willing to lend more,” he said.

Microfinance Institutions Network

’s chairperson Manoj Nambiar said, “This is a good move, reflecting the change in household income since 2015.” He added microfinance lenders will use this increased limit to continue to lend responsibly to the over 50 million borrowers and contribute to financial inclusion.

Announcing the decision, RBI governor

Shaktikanta Das

said that the increase in limits will help improve lending to those at the bottom of the pyramid. The RBI had taken over regulation of MFIs by including them in a separate category under non-banking finance companies in 2010. The income and loan limits to classify an exposure as an eligible asset were last revised in 2015.