Industry leader's comments on RBI removing pricing curbs

15 Mar 2022 , 02:59 PM

Mr. K Paul Thomas, MD and CEO of ESAF Small Finance Bank

The guidelines ensure uniformity across regulated entities irrespective of their legal status. The fact that loans given to households with income up to 3 lakh are considered as MFI loan is a welcome step. Also, limiting the maximum repayment value to 50 percent of the monthly household income will ensure the financial safety of the customers. It will guard against over indebtedness. SROs can come up with a common framework for assessing household income. Mandatorily submitting household incomes to credit bureaus will improve data quality. Bringing 100 crore plus not-for-profit companies on par with other players will bridge the regulatory gaps. RBI has taken a holistic approach to regulate the sector irrespective of the legal status or mode of operations.

Mr. Chandra Shekhar Ghosh, MD & CEO, Bandhan Bank

We welcome the regulatory framework for microfinance loans, announced by the Reserve Bank of India today. The guidelines will further help deepen the penetration of microcredit in India, which has helped millions of Indians live a life of dignity and economic independence through access to formal financial services.

The latest guidelines are a strong reflection of the maturity that the microcredit industry has reached in India; and it will help harmonize the regulatory framework for different types of lenders, encourage healthy competition and enable customers to make an informed choice regarding their credit needs.

The Malegam committee on microfinance, around a decade back, played a huge role in strengthening the foundations of the Indian microfinance industry with setting up policy contours around a host of areas including lending process, pricing of interest rates, increasing transparency, capital and provisioning norms, and reducing the problems of multiple lending and over borrowing.

Since then, the industry has significantly consolidated its position with strong last mile credit delivery and helping income generation and employment at the bottom of the pyramid. This new framework, which is a result of a comprehensive review, will help the industry scale further, and ensure better risk mitigation and stronger financial inclusion.