RBI proposes to lift interest rate cap on microfinance institutions

Proposes debt-income cap; common rules for all micro-loan lenders

The Reserve Bank of India (RBI) on Monday proposed to lift the interest rate cap on microfinance institutions (MFIs), and said all micro loans should be regulated by a common set of guidelines irrespective of who gives them.  

Proposing a debt-income ratio cap, the RBI said the loans should be given in such a way that the payment of interest and repayment of principal for all outstanding loans of a household at any point of time should not cross 50 per cent of the household income.  

This debt-income cap, the RBI felt, would obviate the need for having multiple restrictions being faced