Categorised under 3 heads, these guidelines aim to address the issue of pricing, over indebtedness and discipline.
Key features
- Pricing of Loans: MFIs to follow transparent pricing policies with the rate of interest justifiable and approved by Board Members.
- Over indebtedness: Number of lenders for MF loans shall not exceed 3 from all types of lenders.
- Code of Conduct and Discipline: No fresh loan to any client who is in default for more than 60 days with any lender.
About Microfinance (Microcredit)
- Meaning: It refers to the provision of small credit to the low-income individuals/groups having no other access to financial services.
- MFIs offer multiple services like savings accounts, fund transfers, micro insurance, and microcredit and earn interest on credit.
- Origin: The idea originated with the creation of Grameen Bank (1983), offering small loans to entrepreneurs, by the Bangladeshi social entrepreneur Muhammad Yunus.
Key Initiatives for regulation of MFIs in India
- Self-Regulatory Organizations (SROs): Microfinance Institutions Network (MFIN) and Sa-Dhan were recognized as SRO by RBI in 2014.
- Regulatory Framework for Microfinance Loans (2022): By RBI deals with definition of microfinance loans, repayment limits, etc.
