Pre-payment penalty will not be levied on prepayment of small loans, know RBI’s new rule

A consultative document has been introduced with the objective of creating a uniform regulation for the firms belonging to the microfinance segment.

A consultative document has been introduced with the objective of creating a uniform regulation for the firms belonging to the microfinance segment.

RBI issues consultative document on microfinance regulation, pre-payment penalty not included

New Delhi. The Reserve Bank of India (RBI, RBI) is making a new framework for small loans i.e. microfinance. In this, provisions like non-levy of pre-payment penalty for premature repayment of loan are being included in this.

The bank on Monday issued a consultative document on uniform regulation for firms belonging to the microfinance segment. The objective of this document is to improve the regulatory framework for various regulated lenders involved in microfinance. The Reserve Bank has sought comments on the consultative document by July 31.

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Loan repayment limit to be fixed as per the income The key points of the consulting paper include a common definition of microfinance loan for all regulated entities, fixing the loan repayment limit as per the percentage of a family’s income, a policy for estimating the family’s income Banana and no prepayment penalty for repayment of the loan before the stipulated tenor.

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Guidelines for NBFC companies

The document includes formulation of pricing guidelines for NBFC-MFIs as per guidelines for non-banking finance companies (NBFCs) and micro finance companies, preparation of a simple fact sheet on pricing of microfinance loans for better transparency and microfinance on the websites of regulated entities. There are proposals to show the minimum and maximum average interest rates for the loan.

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Changes will happen in microfinance segment after feedback

RBI, in a statement on Developmental and Regulatory Policies earlier this year, had said that a consultative document would be issued with the objective of creating a uniform regulatory framework for various regulated entities in the microfinance segment. The regulations for the microfinance segment can be changed after receiving feedback from the stakeholders on this document.




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