Loans are underwritten based on a risk-based analysis and the lender charges a risk premium to the borrower.

Now that RBI has removed the limits on small loan pricing from NBFC MFIs, the playing field has been leveled for all players in the microfinance space.

Loans are underwritten based on a risk-based analysis and the lender charges a risk premium to the borrower.

The removal of the interest rate cap – 10-12 ppts above the institution’s cost of funds, or 2.75x the average base rate of the five largest commercial banks, whichever is the lower – will make players compete in terms of the pricing of loans and benefit the borrowers.


This post Microfinance gets a flat field was original published at “https://www.financialexpress.com/opinion/microfinance-gets-a-level-field/2464373/”

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