The Reserve Bank of India has instructed all the regular entities lending to the microfinance sector to ensure that the loans are collateral-free and not protected by a lien on the borrower’s deposit account.
Tune into the #LawWiser premium video on “RBI Directions for Microfinance Loans, 2022” featuring Prabhjot Singh briefly explaining the directions given by RBI.
In the video, Prabhjot tells us that the Reserve Bank of India has eliminated the margin caps that were previously solely applicable to non-banking finance businesses.
The collateral loans offered to low-income households, i.e., households with an annual income up to $3 lakh, will now be termed “microfinance loans”.
He shares that there must be a RE board-approved policy that brings flexibility to the payback period.
Interest rates on all three levels, i.e., minimum, maximum, and average on the microfinance loans must be informed in all RE offices.
RE or its agent will not utilize punitive recovery measures.
To learn more about these RBI directions, watch the full video.
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