MFIN for limiting indebtedness up to Rs 2 lakh per borrower

Kolkata, Jul 9 (PTI) Micro-credit indebtedness per borrower should be limited to Rs two lakh, while the number of lenders to a debtor should also be restricted to a maximum of four, MFIN, a self-regulatory organisation of the industry, said on Tuesday.

With nearly 80 per cent of the micro-loans having a tenure of 18 months or more, a limit of Rs two lakh will effectively mean lesser repayment obligation for a borrower, Micro-finance Industry Network (MFIN) said in a statement.

The industry body also said that assessing a borrower’s household income and loan repayment obligations is an important part of underwriting. This ensures that a debtor is “not overstretched and is to honour loan repayments on time”.

MFIN also urged credit information companies to improve the quality of data available for underwriting.

The indebtedness is the responsibility of microfinance lenders, said the industry body, adding that it has taken steps to facilitate responsible lending and promote a steady and calibrated sector growth.

The microfinance sector serves borrowers below an annual income of Rs three lakh.

Supported by conducive regulations, the sector now has a gross loan portfolio of Rs 4.33 lakh crore and covers nearly 7.8 crore borrowers, the industry body said.