New rules of RBI for microlenders to help widen profits: Crisil
ECONOMY & POLICY

New rules of RBI for microlenders to help widen profits: Crisil

According to the Crisil Rating report, the Reserve Bank of India's (RBI) new rules for microfinance institutions (MFIs) will help widen profits by giving such entities greater flexibility in operations.

According to the Crisil Rating report, removing the interest margin cap on loans is the biggest amendment in regulation that will help non-banking finance company-microfinance institutions (NBFC-MFIs) adopt a risk-based pricing approach and support profitability.

It will benefit mid-sized entities, which are under a lending rate cap linked to the base rate with relatively higher borrowing costs, and those with a rural focus, where competition is less and borrowers are less sensitive to interest rates.

It is an initiative to increase the permissible household income to Rs 3 lakh per annum, and the limit of non-microfinance loans to 25% of total assets would help grow the addressable market for such entities.

The last two years have been challenging for microfinance lenders due to the pandemic as they struggled with high credit costs.

Deputy Chief Ratings Officer, Krishnan Sitaraman, told the media that the amendment would help NBFC-MFIs to adopt risk-based pricing, improve profitability, expand the addressable market, and also address concerns about the over-indebtedness of borrowers.

Image Source

Also read: RBI to hold lending rate steady at 4% to aid economic recovery

According to the Crisil Rating report, the Reserve Bank of India's (RBI) new rules for microfinance institutions (MFIs) will help widen profits by giving such entities greater flexibility in operations. According to the Crisil Rating report, removing the interest margin cap on loans is the biggest amendment in regulation that will help non-banking finance company-microfinance institutions (NBFC-MFIs) adopt a risk-based pricing approach and support profitability. It will benefit mid-sized entities, which are under a lending rate cap linked to the base rate with relatively higher borrowing costs, and those with a rural focus, where competition is less and borrowers are less sensitive to interest rates. It is an initiative to increase the permissible household income to Rs 3 lakh per annum, and the limit of non-microfinance loans to 25% of total assets would help grow the addressable market for such entities. The last two years have been challenging for microfinance lenders due to the pandemic as they struggled with high credit costs. Deputy Chief Ratings Officer, Krishnan Sitaraman, told the media that the amendment would help NBFC-MFIs to adopt risk-based pricing, improve profitability, expand the addressable market, and also address concerns about the over-indebtedness of borrowers. Image Source Also read: RBI to hold lending rate steady at 4% to aid economic recovery

Next Story
Infrastructure Energy

South West Pinnacle Wins Rs 30 Cr Oman Mining Contract

South West Pinnacle Exploration Ltd has secured a Rs 30 crore contract from Minerals Development Oman (MDO) for mining exploration in concession areas 12B and 13.The two-year project will be carried out via Alara Resources LLC, a JV in Oman. MDO, backed by Oman’s investment authorities, focuses on monetising mineral wealth.The contract covers copper, gold, and chromite and highlights South West Pinnacle’s growing footprint in international exploration and mining services. ..

Next Story
Equipment

Godrej GEG Boosts Intralogistics with AI and Green Tech

Godrej Enterprises Group (GEG) is revolutionising warehouse and factory logistics through its Material Handling Equipment and Storage Solutions arms by integrating AI, IoT, and automation.With 20–25% market share and 85% local sourcing, GEG champions Atmanirbhar Bharat and sustainability. The Chennai plant, a green manufacturing leader, uses RoHS-compliant materials and has slashed energy consumption by 60%.GEG serves e-commerce, FMCG, retail, and cold chains with high-performance racking and electric forklifts. Upcoming IoT-enabled forklifts and telematics solutions aim to improve speed, sa..

Next Story
Infrastructure Urban

Amit Shah Inaugurates Key Projects Across Gujarat

Union Home Minister Amit Shah inaugurated and laid the foundation stone for various projects in Gujarat’s Panchmahal district and Ahmedabad.In Godhra, he inaugurated the Center of Excellence building, sports complex, reservoir, and Miyawaki plantation. In Ahmedabad, he unveiled a new cooperative complex in Adaroda village and a primary school in Juwal.These projects, under the Model Co-op Village scheme, aim to boost education, sustainability, and rural development across the state. ..

Advertisement

Advertisement

Subscribe to Our Newsletter

Get daily newsletters around different themes from Construction world.

STAY CONNECTED

Advertisement

Advertisement

Advertisement

Advertisement

Talk to us?