 "MFI loans might get cheaper from April, with new RBI norm")
Loans by microfinance institutions (MFIs) might become cheaper from April as a fallout of changes in debt pricing norms by the Reserve Bank of India (RBI).
RBI has said the interest charged by non-banking finance companies (NBFCs) working as MFIs will be the lower of the cost of funds plus margins and the average base rate of the five largest commercial banks by assets multiplied by 2.75.
Alok Prasad, chief executive officer, Micro Finance Institutions Network, said the new norm will bring in dynamic pricing that reflect the true cost of funds.
Also, the benefit of reduction in costs will have to be passed on to the customer.
RBI will communicate the average of the base rates of the five largest commercial banks on the final working day of the previous quarter.
This shall determine interest rates for the ensuing quarter.
The new norm takes effect from April 1. RBI will announce the applicable average base rate on March 31 and every quarter-end thereafter.
In May 2013, RBI had said the margin cap for all non-banking finance companies, irrespective of their size, would be 12 per cent till March 31, 2014.
However, from April 2014, margin caps will be 10 per cent for large MFIs (loan portfolios exceeding Rs 100 crore) and 12 per cent for the others.
RBI has said the interest charged by non-banking finance companies (NBFCs) working as MFIs will be the lower of the cost of funds plus margins and the average base rate of the five largest commercial banks by assets multiplied by 2.75.
Alok Prasad, chief executive officer, Micro Finance Institutions Network, said the new norm will bring in dynamic pricing that reflect the true cost of funds.
Also, the benefit of reduction in costs will have to be passed on to the customer.
RBI will communicate the average of the base rates of the five largest commercial banks on the final working day of the previous quarter.
This shall determine interest rates for the ensuing quarter.
The new norm takes effect from April 1. RBI will announce the applicable average base rate on March 31 and every quarter-end thereafter.
In May 2013, RBI had said the margin cap for all non-banking finance companies, irrespective of their size, would be 12 per cent till March 31, 2014.
However, from April 2014, margin caps will be 10 per cent for large MFIs (loan portfolios exceeding Rs 100 crore) and 12 per cent for the others.