RBI Raises Lending Limit for Microfinance Institutions

Mumbai: The Reserve Bank of India (RBI) on Tuesday allowed microfinance institutions (MFI) to lend up to Rs 1 lakh to small borrowers.

The increase in the limit was suggested by the Nachiket Mor committee on Comprehensive Financial Services for Small Businesses and Low Income Households.

The borrowing limit, excluding educational or medical expenses, has been doubled to Rs 1 lakh from the existing Rs 50,000, the RBI said in its first bi-monthly monetary policy statement in the new fiscal year that began on April 1.

Loan disbursed to a borrower with a rural household annual income should not exceed Rs 1,00,000 (enhanced from Rs 60,000) or urban and semi-urban household income should not exceed Rs 1,60,000 (enhanced from Rs 1,20,000), it said.

It further said that disbursement of the loan amount should not exceed Rs 60,000 - up from Rs 35,000 in the first cycle, and Rs 1 lakh from Rs 50,000 in subsequent cycles.