Be Careful in Using Flexibility on Interest: Governor for NBFC-MFIs

The RBI governor asked units to be “prudent” in using flexibility on interest rates.


RBI Governor Shaktikanta Das said on Wednesday that some non-banking finance companies-microfinance institutions (NBFC-MFIs) are making wider net interest margins, asked entities to be “prudent” in using flexibility on the interest they charge borrowers.

Speaking at the annual Fibac event, Mr. Das said the micro-loan segment serves marginalized clientele and has emerged as an important financial channel to promote financial inclusion.

“Although interest rates are deregulated, certain NBFC-MFIs seem to be enjoying relatively higher net interest margins. Indeed, it is up to microfinance lenders themselves to ensure that the flexibility they get in setting interest rates is used judiciously,” he said.

It may be noted that after the crisis in the microfinance segment in Andhra Pradesh that had also led to the creation of the NBFC-MFI segment, the Reserve Bank of India (RBI) had capped the maximum interest that lenders can charge at 24 per cent . The rate scheme was deregulated in 2021, allowing entities to charge as much as they want.

Das acknowledged that such entities need to keep in mind the affordability and repayment capacity of borrowers while fixing their interest rates.

(With the exception of the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

Leave a Reply

Your email address will not be published. Required fields are marked *