The Reserve Bank has eased micro finance norm of maximum 4 per cent variance in interest rates for small loans offered to SCs living below double poverty line in order to provide credit at cheaper rate.
As per RBI norms for micro finance lenders, the maximum variance between minimum and maximum interest rates on loans cannot exceed 4 per cent.
RBI in a notification today said the condition of up to only 4 per cent variance between minimum and maximum interest rates on loans given by micro finance lenders will not be applicable on sections belonging to scheduled castes living below double poverty line.
The National Scheduled Castes Finance & Development Corporation (NSFDC) under Ministry of Social Justice & Empowerment has proposed to expand outreach by channelising funds through select NBFC-MFIs at lower rate of interest, it said.
The objective of NSFDC is to work for the economic empowerment of persons belonging to Scheduled Castes living below the Double Poverty Line, RBI said.
“In order to enable NBFC-MFIs to act as channelising agents of NSFDC, it has been decided that the condition relating to the maximum variance permitted shall not be applicable to loans extended by NBFC-MFIs against funding by NSFDC,” RBI said.
The on-lending to individuals by NBFC-MFIs out of funds of NSFDC shall only be through direct credit to their accounts with banks, it added.
Further, NBFC-MFIs shall exclude borrowing from NSFDC in arriving at the average cost of funds of the company for the purpose of pricing of credit, other than to the beneficiaries targeted by NSFDC.
For this, NBFC-MFIs shall maintain proper record of funds received from NSFDC and the lending out of those funds, RBI said.
RBI said NBFC-MFIs will be required to make appropriate disclosures in this regard their balance sheet.
The minimum disclosures should include quantum of funds received from NSFDC, cost of such funds, loans disbursed therefrom, rate of interest on such loans and the number of beneficiaries, said the notification.