This will help strike a balance between prudence and growth and will also pave the way for up scaling microfinance services in a sustainable manner. Following these amendments, MFBs can now extend micro loans of up to Rs 150,000/- for general purpose and Rs 500,000/- for housing purpose. Also, the borrower's annual income has been relaxed and now with an annual income of Rs 300,000/- borrower can borrow Rs 150,000/- for general loans.
Similarly, the loan classification criteria for MFBs have been rationalised to bring it in line with the international best practices and industry norms. Now loans overdue by 30 days or more, but less than 60 days will be classified as 'Other Assets Especially Mentioned - OAEM', and will require no specific provisioning. This will reduce stress on MFBs' capital allowing them to upscale services.
The loans overdue by 60 days or more, but less than 90 days will be classified as 'Sub-standard', and will require a specific provision of 25 per cent of outstanding principal net of cash collateral. Also, the CIB report has been made compulsory for borrowers with exposure greater than Rs 50,000/-.
This will encourage MFBs to properly assess borrowers risk and avoid over- indebted clients. Re-definition of income thresholds and revision in loan sizes, particularly housing loans for the low income segment, will help a lot in increasing access to finance.