The Reserve Bank of India (RBI) on Monday said that micro-finance lending institutions cannot charge more interest from customers. A micro-finance loan refers to a guarantee-free loan given to a family with an annual income of up to Rs 3 lakh. Along with this, these lenders have also been asked by the RBI to fix a limit on the charges associated with the loans.
In the new guidelines issued by the RBI, it has been said that all regular units should implement a policy approved by the board of directors. The policy needs to bring clarity on the pricing, cover, interest rate cap and all other charges for micro-finance loans. RBI said that interest rates and other charges on these loans should not be kept very high. Because these fees and rates will be under the supervision of the central bank.
In its new guidelines, the RBI has said that every regular entity will have to provide price-related information about a potential borrower in the form of a fact-sheet. Apart from this, the central bank has also said that if the borrower wants to repay his loan prematurely, then no penalty should be imposed on him. However, if there is a delay in the installment payment, the micro-finance institution can impose a penalty on the customer but that too, not on the entire loan amount but on the outstanding amount.