The Reserve Bank of India vide its notification dated 14th March 2022 has published Reserve Bank of India (Regulatory Framework for Microfinance Loans) Directions, 2022 which shall come into force from 1st April 2022.
The provisions of these directions shall apply to the following Regulating Entities (RE):
- All Commercial Banks (including Small Finance Banks, Local Area Banks, and Regional Rural Banks) excluding Payments Banks
- All Primary (Urban) Co-operative Banks/ State Co-operative Banks/ District Central Co-operative Banks; and to
- All Non-Banking Financial Companies (including Microfinance Institutions and Housing Finance Companies).
Each RE shall put in place a board-approved policy for assessment of household income. Each RE shall mandatorily submit information regarding household income to the Credit Information Companies (CICs). Reasons for any divergence between the already reported household income and assessed household income shall be specifically ascertained from the borrower/s before updating the assessed household income with CICs.
Further, each RE shall prominently display the minimum, maximum and average interest rates charged on microfinance loans in all its offices, in the literature (information booklets/ pamphlets) issued by it and details on its website. This information shall also be included in the supervisory returns and subjected to supervisory scrutiny.
The REs shall have a due diligence process in place for engagement of recovery agents, which shall, inter alia, cover individuals involved in the recovery process. REs shall ensure that the recovery agents engaged by them carry out verification of the antecedents of their employees, which shall include police verification. REs shall also decide the periodicity at which re-verification of antecedents shall be resorted to.
