RBI raises cap on borrowing from MFIs to Rs 1.25 lakh in rural areas

The Reserve Bank of India (RBI) on Friday increased the household income limits for borrowers of NBFC-MFIs from Rs 1 lakh to Rs 1.25 lakh for the rural areas with an aim to strengthen credit to those in the bottom of the economic pyramid.

Similarly, the limit has been increased from Rs 1.6 lakh for urban or semi-urban areas to Rs 2 lakh, the RBI said in a circular.

The limit has been increased after taking into consideration the important role played by microfinance institutions (MFIs) in delivering credit to those in the bottom of the economic pyramid and to enable them play their assigned role in a growing economy, it said.

"Further, the limit on total indebtedness of the borrower has been increased from Rs 1 lakh to Rs 1.25 lakh," the circular said.

With the revision to the limit on total indebtedness, the limits on disbursal of loans have been raised from Rs 60,000 for the first cycle to Rs 75,000, and from Rs 1 lakh for the subsequent cycles to Rs 1.25 lakh.