In response to the demands from the microfinance industry, the Reserve Bank has relaxed the guidelines for all NBFC-MFIs. RBI has allowed MFIs to charge more than 26% as interest rate on loans given to borrowers. The central bank has also given MFIs 5 years to make full provisioning against bad loans
The Reserve Bank of India said on Friday registered non-banking financial companies (NBFCs) intending to convert to non-banking financial company-micro finance institutions (NBFC-MFI) will have to maintain net owned funds at Rs 300 crore (USD 537,200)by March 31, 2013 and Rs 500 crore by end-March 2014.
If they fail to have adequate funds, their lending to the microfinance sector will be restricted to 10% of total assets.
In December last year, NBFC-MFI was created as a new category of NBFCs, governed by a regulatory framework.
Registered NBFCs that want to convert to NBFC-MFI must seek registration by Oct. 31, the RBI said in a modification to the earlier guidelines.
(With inputs from Reuters)