Microfinance companies can lend at a maximum interest rate of 27.74 per cent per year in the last quarter of the current financial year, the RBI implied in a statement.
Since the beginning of the current financial year (April 1, 2014) the RBI has been prescribing a base rate for microfinance institutions, which in turn is based on base rates of five large commercial banks by assets.
So, for the quarter beginning January 1, 2015, the RBI has pegged this base rate at 10.09 per cent. Therefore, MFIs can charge customers a maximum of 2.75 times this base rate.
On the other hand, MFIs can also charge its customers a rate which covers its cost of funds and a margin, provided it is lower than the above formula of 2.75 times the base rate. This margin is fixed at 10 per cent for large MFIs with assets more than Rs 100 crore and 12 per cent for other MFIs.
The RBI sought to bring some uniformity in the lending rate of MFIs. MFIs typically lend loans to un-banked and under-banked borrowers whose average value is about Rs 9000-10000 per loan.