MFIN defers capping lenders to each borrower by three months, other covenants come into effect

Microfinance Industry Network (MFIN), the self-regulatory body for microfinance, has confirmed to have deferred to April 1 its plan of implementing a cap on lenders to each borrower, citing time required to change the IT and back-end system.

Speaking to CNBC-TV18, MFIN's Alok Misra said, "changes to IT and engine room systems will take time." He added that MFIN will implement the lending cap in three months' time, with 'other covenants being implemented from January 1'.

Earlier, on January 2, Livemint had reported citing people familiar with the development that MFIN deferred the plan to implement limiting lenders per borrower to three starting April, as it would give them enough time to manage delinquencies.

On October 17, RBI had taken action against four NBFCs and NBFC-MFI, citing 'material supervisory concerns', and asked entities to cease and desist sanction and disbursal of loans. These entities were Asirvad Micro Finance, Arohan Financial Services, DMI Finance, and Navi Finserv, as per central bank's notification. RBI said it had observed concerns in the pricing policy of these companies in terms of their weighted average lending rate (WALR) and the interest spread charged over their cost of funds, which were not in adherence with regulations.