Microfinance sector wants banks, NBFCs to come under lending code

The microfinance sector is pitching to bring on board banks and non-banking financial companies (NBFCs) under a voluntary common code of lending, proposed to be effective from July 1.

In view of the aggressive lending by banks and financial institutions in the microfinance space, these companies are seeking a level-playing field where all lenders in the segment come under a common code, namely the Code for Responsible Lending.

The present Reserve Bank of India (RBI) regulations governing over-indebtedness in microlending applies only to NBFCs-MFIs and not-for-profit MFIs. According to RBI regulations, the total loan amount to a single borrower should not exceed