The Reserve Bank of India (RBI) announced on September 30 the average base rate to be charged by Non-Banking Financial Company- Micro Finance Institutions (NBFC-MFIs) to their borrowers for the last quarter of the year starting from October 1, 2021. The base interest rate to be charged to the borrowers has been set to 7.95 per cent for the fourth quarter, down 0.2 per cent from the last quarter.
“The Reserve Bank of India has today communicated that the applicable average base rate to be charged by Non-Banking Financial Company – Micro Finance Institutions (NBFC-MFIs) to their borrowers for the quarter beginning October 1, 2021, will be 7.95 per cent,” the RBI said in a release on Thursday.
NBFC MFI is a non-deposit taking non-banking financial company and its operation is governed by the RBI wings for NBFC Regulation and supervision. These micro-financing institutions provide credit and other financial services to the poorer sections of society, assisting those who are unable to get loans from commercial banks. The objective of covering them under RBI was to make these NBFC MFIs accountable and accessible to the potential borrowers while ensuring that the borrowers were safeguarded from exploitation.
The RBI sets the base interest rate to be charged by the NBFC-MFIs for the upcoming quarter on the last day of every financial quarter, taking into account the average base rates of the five largest commercial banks in the country, including the State Bank of India, and multiplying it by 2.75.
The base rate to be charged by NBFC-MFIs for the third quarter spanning from July to September was set at 7.98 per cent while it was 7.81 per cent during the April- June quarter earlier this year.