siliconindia | | APRIL 20228IN FocusRBI'S NEW RULES FOR MICROLENDERS WILL ASSIST WIDEN PROFITS: CRISILeserve Bank's new rules for microlenders, who have been deeply impacted in the pandemic be-cause of loan losses, will help widen profits by giving such entities greater flexibility in opera-tions, a report said on Monday.Removing the interest margin cap on loans, the biggest change in regulation will help NBFC-MFIs (non-banking finance company-microfinance institutions) adopt a risk-based pricing approach and hence support profitability, the report by Crisil Ratings said."Specifically, this will benefit mid-sized entities which were handicapped by the lending rate cap linked to the base rate, given their relatively higher borrowing cost, and those with rural focus, where competition is less and borrowers are relatively less sensitive to interest rates", it said.The move to increase the permissible household in-come to Rs.3 lakh per annum and the increase in limit of non-microfinance loans to 25 percent of total assets will help increase the addressable market for such entities, it said."The last two years have been extremely challeng-ing for microfinance lenders, as they grappled with high credit costs. The changes announced will help NBFC-MFIs adopt risk-based pricing and improve their profit-ability, expand their addressable market and also address concerns on over-indebtedness of borrowers", the agen-cy's Deputy Chief Ratings Officer, Krishnan Sitaraman said. RRemoving the interest margin cap on loans, the biggest change in regulation will help NBFC-MFIs adopt a risk-based pricing approach and hence support profitabilityBy SI Team
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