"The bank has been receiving representations from NBFCs that are primarily intomicrofinancing, conveying difficulties in complying with the framework," the RBI said.
All registered non-banking financial companies (NBFCs) intending to convert themselves into non-banking financial company-micro finance institutions (NBFC-MFIs) must seek registration with immediate effect, and, in any case, not later than October 31, the Reserve Bank of India said in a notification on Friday.
All new companies desiring NBFC-MFI registration will need a minimum NOF of Rs.5 crore except those in the North Eastern Region of the country which will require NOF of Rs.2 crore till further notice, as hitherto and would comply,from the beginning, with all other criteria laid out in the following paragraphs.
In a surprising move, RBI also removed the cap on micro lenders' lending rates. "To allow for operational flexibility, non-banking financial company- MFIs would ensure the average interest rate on loans during a financial year does not exceed the average borrowing cost during that financial year plus the margin, within the prescribed cap. Moreover, while the rate of interest on individual loans may exceed 26 per cent, the maximum variance permitted for individual loans between the minimum and maximum interest rates cannot exceed four per cent," RBI said.
NBFCs in the north-eastern region will have to maintain net-owned funds of Rs 1 crore by March 31, 2013, and Rs 2 crore by March 31, 2014.
NBFC-MFIs are required to maintain not less than 85% of their net assets as qualifying assets.
"NBFC-MFIs were also required to ensure that the aggregate amount of loans given for income generation is not less than 75% of the total loans extended," RBI said in the circular.