The Reserve Bank of India (RBI) has proposed a new regulatory framework for microfinance institutions (MFIs). The key proposals include a common definition of microfinance loans for all regulated entities, capping the outflow on account of repayment of loan obligations of a household to a maximum of 50 per cent of the household income and no pre-payment penalty or requirement of collateral, along with greater flexibility of repayment frequency for all microfinance loans. To assess household income, it is proposed that income assessment should be carried out at the household level.
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