The Reserve Bank of India (RBI) on Friday introduced a new norm for pricing of credit by non-banking financial company-micro finance institutions (NBFC-MFIs).
The RBI has said that the interest rates charged by an NBFC-MFI to its borrowers will be the lower of the following: The cost of funds plus margin. The average base rate of the five largest commercial banks by assets multiplied by 2.75.
The average of the base rates of the five largest commercial banks, the RBI said, would advised by it on the last working day of the previous quarter, which, in turn, would determine interest rates for the ensuing quarter.
The new norm will come into effect from the quarter beginning April 01, says the RBI in a release.