Microfinance and Self-Help Groups in India
Regulation After the Crisis
The RBI set rules on interest margins, borrower limits and fair practices, and later moved to a simpler, income-based framework in 2022.
Regulation tried to protect borrowers and keep lenders healthy.
Earlier rules
After 2011, limits applied on margins, loan sizes and the number of lenders per borrower.
2022 framework
The RBI revised the rules so that microloans are defined by household income, with limits on how much of income can go to repayments.
Pricing freedom
Lenders may set interest rates within board-approved policies, with transparency requirements.
Credit bureaus
Sharing borrower data helps prevent multiple borrowing.
A lender checks that a household's total loan repayments do not exceed a set share of income.
They reduce, not remove, it.
- RBI regulates MFIs.
- 2022 rules use household income.
- Credit bureaus reduce over-borrowing.
- Pricing must be transparent.
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