The Reserve Bank of India’s new framework for the microfinance sector, in which it replaced rule-based guidelines on pricing of loans with a principle-based framework, is aimed at making the borrower aware of the total cost being paid by him for the loan, while ensuring comparability amongst lenders by standardising the calculation of all-inclusive cost. These measures, along with a cap on repayment obligations and steps to check over-indebtedness introduced by the regulator, will eventually bring down interest rates for the borrowers, said M Rajeshwar Rao, Deputy Governor, RBI.
Speaking at the launch of MFIN’s India Microfinance review, Rao said,