Large NBFCs can lend at 12% margin this fiscal

A large Non Banking Financial Company (NBFC) that predominantly operates as a microfinance institution (MFI) can extend credit at 12 per cent over its cost of borrowing during this fiscal, according to a notification issued by Reserve Bank of India.

In its August 2012 directive to NBFC-MFIs, the RBI had capped the margins (the mark-up charged to borrowers over the institution’s cost of borrowing) at 10 per cent for large MFIs (loans portfolios exceeding Rs 100 crore) and 12 per cent for the others.

Going by the latest notification, customers borrowing from large MFIs over the course of the current financial year will have to pay two per cent extra. An average microfinance loan is about Rs 10,000.

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