Deregulation of rates for NBFC-MFIs may lead to expansion of market

The large NBFC-MFIs have not rationalised their lending rates, despite achieving economies of scale.

The Reserve Bank of India’s (RBI’s) proposal to lift the interest cap on non-banking financial company-microfinance institutions (NBFC-MFIs) will ensure there is no arbitrage for certain market participants in the sector. The market mechanism will, eventually, crystallise the interest rate range within which all players will function, observed experts.
 
It will also lead to higher coverage because the deregulation of interest rates for NBFC-MFIs will allow them the flexibility to venture into areas where access to credit has so far been limited due to operational costs attached to it. With no cap on pricing, these lenders can afford to