RBI caps lending rate for MFIs at 27.75% for June quarter

KOLKATA: The Reserve Bank of India has capped lending rate for micro finance companies at 27.75% for the quarter to June.

The banking regulator arrived at this rate by taking average of the base rates of five largest commercial banks on the last working day of March and multiplying it by 2.75 times. It will revise the rate every three months.

The RBI prescribed the formula last month to remove anomalies in the pricing mechanism of micro finance institutions ( MFIs) by linking it to their actual cost of funds. Some 48 micro lenders that are registered with the RBI as non-banking finance companies will have to follow this rule.

This will be the highest rate MFIs can charge to their borrowers in the next quarter.Most leading micro lenders charge around 24% at present.