Updated - February 29, 2024 at 08:10 PM.| Mumbai
They want this limit upped from the existing ₹3 lakh to about ₹5 lakh
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NBFC-MFIs (non-banking finance company-microfinance institutions) want the Reserve Bank of India to revise the criteria relating to annual household income limit for giving micro loans in view of their growing needs of individual borrowers. They want this limit upped from the existing ₹3 lakh to about ₹5 lakh.
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.
Manoj Kumar Nambiar, Managing Director, Arohan Financial Services Ltd, and Vice-Chairperson of Microfinance Industry Network (MFIN), underscored that the request to revise the annual household income limit is part of the ongoing discussions with the RBI.
“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.
The RBI defines a microfinance loan as a collateral-free loan given to a household having annual household income up to ₹3 lakh. For this purpose, the household means an individual family unit — husband, wife and their unmarried children.
Average microfinance loans size has increased to ₹47,374 in Q3(October-December) FY24 against ₹41,123in the year-ago period and ₹39,512in Q3 FY22, per latest MFIN data.
Alok Misra, CEO & Director, MFIN, said: “Microfinance operations added more than 1 crore unique clients over the last financial year to its fold. The industry saw a robust growth of 24.6per centover the last financial year taking the total portfolio of the industry to Rs 3,99,442 crore. Portfolio delinquency has reached the pre-Covid levels which indicates improving health of the microfinance portfolio”.
According to MFIN data, 91 NBFC-MFIs are the largest providersof micro-credit with a loan amount outstanding of Rs 1,56,245 crore, accounting for 39.1per centof total industry portfolio.
Banks (13) hold the second largest share of portfolio in micro-credit with total loan outstanding of ₹1,33,759 crore, which is 33.5per centof total micro-credit universe. Small Finance Bankshave a total loan amount outstanding of ₹70,449 crorewith total share of 17.6per cent. NBFCs account for another 8.9per centand other MFIs account for 0.8per centof the universe.
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