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Reserve Bank raises income & lending limit for Micro Finance Institutions (MFIs)

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On November 8, 2019, India’s central banking institution, the Reserve Bank of India (RBI) has raised the household income eligibility limit for eligible borrowers from NBFC –MFIs (Non-Banking Financial Companies-  Micro finance Institutions) to Rs 1.25 lakh from the existing Rs 1 lakh in rural areas and from Rs 1.6 lakh to Rs 2 lakh in urban /semi-urban areas.
Apart from this, RBI also increased the limit on disbursal of loans to Rs 75,000 from Rs 60,000 for the 1st cycle, and from Rs 1 lakh for the successive cycles to Rs 1.25 lakh.
RBIKey Points:
i.
MFIs are making a significant contribution to increase financial inclusion by delivering credit to those people in the bottom of the economic pyramid and help them play their assigned role in a growing economy.

ii.Background: The Reserve Bank had formed a sub-committee under the chairmanship of YH Malegam in 2010 to study the issues and challenges of the microfinance sector. A separate category of NBFC-MFIs was constituted on the basis of the suggestions of the sub-committee and detailed regulatory guidelines were issued in December 2011.

About RBI:
Headquarters
– Maharashtra
Established- 1 April 1935
Governor- Shaktikanta Das
Deputy Governors- 4 (BP Kanungo, N S Vishwanathan, and Mahesh Kumar Jain, 1 is yet to be appointed)

NBFC-MFI:
It is  a non-deposit taking NBFC (other than a company licensed under Section 25 of the Indian Companies Act, 1956) that fulfils minimum net owned Funds of Rs.5 crore.