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Aug 04, 2012, 03.22 PM IST | Source: CNBC-TV18

RBI sets new norms for non-banking financial companies

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.

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)

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