Active Stocks
Mon Apr 15 2024 10:34:03
  1. Tata Steel share price
  2. 162.50 -0.61%
  1. ITC share price
  2. 425.30 -1.12%
  1. Tata Motors share price
  2. 994.35 -2.36%
  1. State Bank Of India share price
  2. 755.10 -1.52%
  1. Wipro share price
  2. 464.45 -1.37%
Business News/ News / India/  Household income limit for micro loans should be raised to 5 lakh, demand NBFCs: Report
BackBack

Household income limit for micro loans should be raised to ₹5 lakh, demand NBFCs: Report

The last time criteria relating to the annual household income limit for giving micro loans to individual borrowers was revised was in 2022, when it was upped from ₹1.25 lakh in rural areas and ₹2 lakh in urban and semi-urban areas to a uniform ₹3 lakh.

A microfinance loan is a collateral-free loan given to a household having annual household income up to ₹3 lakhPremium
A microfinance loan is a collateral-free loan given to a household having annual household income up to 3 lakh

Non-banking finance companies and microfinance institutions want the Reserve Bank of India to reexamine the threshold relating to annual household income limit for giving micro loans. They want this limit to be raised from the current 3 lakh to about 5 lakh, reported Business Line.

They have made this demand in view of growing needs of individual borrowers.

The last time criteria relating to the annual household income limit for giving microloans to individual borrowers was revised was in 2022, when it was upped from 1.25 lakh in rural areas and 2 lakh in urban and semi-urban areas to a uniform 3 lakh.

Manoj Kumar Nambiar, Managing Director, Arohan Financial Services Ltd, and Vice-Chairperson of Microfinance Industry Network (MFIN), emphasises that the request to revise the annual household income limit is part of the ongoing discussions with the RBI.

ALSO READ: Revamped credit scheme to provide additional collateral-free credit for MSMEs

“Typically, they don’t do it on an annual basis, but in about two to three years’ time. But they do re-look at the limit...I’m sure after the end of this financial year, when we look at the numbers and when we also index it with the government schemes/ inflation, we will be able to make a case to the RBI to re-look at the limit," said Nambiar.

What is a microfinance loan?

A microfinance loan is a collateral-free loan given to a household having annual household income up to 3 lakh, according to the Reserve Bank of India. The household for this purpose refers to an individual family unit — husband, wife and their single children.

Average microfinance loan size has increased to 47,374 in Q3 (October-December) FY24 against 41,123 in the year-ago period and 39,512 in Q3 FY22, per latest MFIN data.

“Microfinance operations added more than one crore unique clients over the last financial year to its fold," said Alok Misra, CEO & Director, MFIN.

 

 

Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!

Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
More Less
Published: 01 Mar 2024, 04:09 PM IST
Next Story footLogo
Recommended For You
Switch to the Mint app for fast and personalized news - Get App