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Micro Units Refinance and Development Agency (MUDRA) has requested the RBI to relax or remove the interest rate cap on on-lending by NBFCs to micro units.
At present, NBFCs can add up to 6 percentage points to the rate at which they get funds from MUDRA for on-lending.
The rates are not incentive enough for NBFCs to undertake onward lending activity, say economy watchers.
“We are aware that because of this (interest rate cap), lending from MUDRA to NBFCs is muted. A case is being made with the central bank to see if the interest rate could be raised,” Aalok Gupta, MD and CEO, MUDRA, told BusinessLine here.
Gupta was here to attend the first SIDBI Microfinance Congress, which analysed the emerging challenges in the microfinance sector and made policy recommendations to address them.
The changing landscape of the sector, moving from MFIs to small finance banks or banks, and the requirement of stepping up from microfinance to micro enterprise lending, have set new expectations for the sector.
MUDRA, set up in April 2015 as a wholly-owned subsidiary of SIDBI, refinances banks, micro-finance institutions, NBFCs and other institutions that lend to micro/small business entities under the Pradhan Mantri Mudra Yojana (PMMY).
Its main objective is to offer finance of up to ₹10 lakh to micro enterprises. Gupta said MUDRA has sanctioned ₹5.7 lakh-crore to over 12.2 crore loan accounts over its three years of existence.
Wider range
To broadbase the customer segment, it was recently decided that even tractors and two-wheelers used for commercial purposes will be eligible for support under PMMY, he added.
Gupta further said MUDRA is on course to achieve its 2018-19 budgetary sanction target of ₹3 lakh-crore. In the last three years, it has undertaken cumulative disbursements of ₹16,000 crore as refinance to various MLIs-microfinance institutions, small finance banks and NBFCs.
Gupta said the microfinance sector has played a key role in promoting financial inclusion across the under-served and unserved segments of population. At the same time, he also called for efforts to ensure geographical expansion into hitherto unserved districts/areas identified by NITI Aayog. As on date, microfinance has reached only 200 districts across the country, he added.
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