MicroFinance Industry Network Announces New Regulations On Lending, Interest Rates
MFIN has limited the maximum lenders to a single client to three from the previous limit of four.
MicroFinance Industry Network announced that it would be setting new rules and regulations for companies that come under the ambit of its jurisdiction, according to a statement.
These rules include:
The reduction of maximum lenders to a single client to three from the previous limit of four.
The prohibition of lending to clients who have defaulted for over 60 days, with an outstanding loan of Rs 3,000 or more, with number of days being reduced by more than 30% from the previous limit of 90 days.
The total indebtedness for a microfinance client will now be Rs 2 lakh, including both microfinance loans and unsecured retail loans.
In order to consolidate the know-your-customer process and improve underwriting, the sector has set a target to link the Permanent Account Number to 50% of borrower accounts by March 2025. The validated voter identification document will continue to be the primary identification document.
Board of member regulated entities will keenly review interest rates to ensure that efficiency gains will be passed on to the clients.
This follows on from two directives that the Network had issued earlier this year, which included:
Limiting the number of microfinance lenders to a client to four and restricting the total microfinance loans to a client to Rs 2 lakh. This took place on July 8.
A proposed approach was suggested for taking into account loans with missing Equated Monthly Installments in Credit bureau report, while underwriting microfinance loans on Oct. 7.
MFIN stated that there was "good adherence" to the guardrails issued in July, based on monitoring of credit bureau data for the months of August and September.
"MFIN is confident that with the existing and new measures, the sector will become more resilient and continue to play its vital role in financial inclusion. MFIN as a self regulatory authority will continue to watch the sector closely and its adherence to the new guardrails," said Chief Executive Officer and Director Alok Misra.
