Borrowing from microfinance companies (microfinance borrowers) and non-bank finance companies (NBFCs) may become easier and cheaper in the future. The Reserve Bank has proposed a new regulatory framework for the country’s microfinance. Accordingly, no penalty will be imposed on loan prepayment. Also, borrowers do not have to keep any type of collateral. It is believed to facilitate the disbursement of credit to microfinance institutions.
The Reserve Bank has suggested that in the draft draft of the regulation, the definition of Micro Finance Loans (MFIs) of all regulated entities will be fixed. Or charge higher interest.
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There is no interest rate limit
Currently, micro finance firms have a fixed minimum and maximum limit of interest rate. This is determined by the rules of the Reserve Bank. But under the proposal, there will be no interest rate limit under the new regulation. Experts say that consumers with better records will benefit from lower interest rates. But at present they cannot afford to pay less interest.
Loan without guarantee
The Reserve Bank said in a draft resolution that microfinance loans are collateral or unsecured loans. According to the proposal, a micro finance loan can take an annual income ranging from Rs 1.25 lakh to Rs 2 lakh. The central bank said people living in rural and urban areas could easily afford such loans. Currently, microfinance issues loans ranging from Rs 10,000 to Rs 5 lakh.
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Only 50% of EMI revenue
According to the document, more than 50 percent of one’s gross income cannot be forced to repay in the event of repayment of all existing loans. This means that depending on your income level, total EMI may be only 50 percent of it. Currently, microfinance companies charge 70 to 80 percent of EMI from consumers, experts say.