Make micro finance institutions interest rates consistent with repayment capacity: Rangarajan
In a circular issued by the RBI on August 3, the cap on margin have been revised to 10 per cent for large MFIs (loans portfolios exceeding Rs 100 crore) and 12 per cent for amounts less than Rs 100 crore.
When contacted, Alok Prasad, MFIN CEO said their request on the margin cap is still pending with the RBI.
"It is Malegam's committee suggestion to put interest cap and also on margin. We have to live with that. That is considered to be to be reasonable and appropriate," Rangarajan said.
He said it is "unfortunate" that in the whole episode even the MFIs which are operating with the right principles have also been affected.
"...we have to restate the policy to be followed by the MFIs. I would say that if the MFIs follow the original principles of enabling the individuals to raise the income capacity by borrowing then it will be good idea," Rangarajan added.