The Reserve Bank of India on Monday directed microfinance lenders not to charge usurious rate of interest from borrowers and also asked them to put in place a ceiling on pricing of loans and related fees.
Issuing ‘Master Direction Reserve Bank of India (Regulatory Framework for Microfinance Loans) Directions, 2022’, the RBI said all regulated entities (REs) should put in place a board-approved policy regarding pricing of microfinance loans, covering, a ceiling on the interest rate and all other charges applicable to microfinance loans. “Interest rates and other charges/ fees on microfinance loans should not be usurious. These shall be subjected to supervisory scrutiny by the Reserve Bank,” the RBI said.
The central bank said each RE has to disclose pricing-related information to a prospective borrower in a standardised simplified factsheet.