MFIs cheer RBI move to hike lending cap; SKS Microfinance surges 9%

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Kolkata | Published: April 8, 2015 12:12:17 AM

The microfinance industry on Tuesday welcomed the RBI’s move to raise the lending caps for the sector to R1 lakh from the existing Rs 50,000...

The microfinance industry on Tuesday welcomed the RBI’s move to raise the lending caps for the sector to R1 lakh from the existing R50,000 as the central bank hiked the borrowing limits for an individual from MFIs.

“The microfinance industry strongly welcomes RBI’s move to raise the lending cap to R1 lakh. We had been in dialogue with the RBI on this for the past six months or so. A formal request to the central bank was made last October, not just for raising of the lending cap but also other changes to the regulations such as the 85% qualifying assets requirement,” Micro Finance Institutions Network (MFIN) CEO Alok Prasad told FE.

“There is a need to create a full architecture for ensuring that the ‘unfunded segments’ are adequately supported by the formal sector financial institutions. Today’s move should be seen in this broader context. It is a step in the right direction,” Prasad added.

RBI, in its first bi-monthly monetary policy statement for 2015-16, raised borrowing limits for an individual from micro-finance institutions and also revised income limits of borrowers.

“Taking into consideration the improvement in the MFI sector and recommendations of the Committee on Comprehensive Financial Services for Small Businesses and Low Income Households, there is a need to revise upwards the limit relating to total indebtedness of the borrower, eligible rural and semi-urban household annual incomes and loan amounts to be disbursed in the first cycle and in subsequent cycles,” the statement said.

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