Checklist on NBFC - Micro Finance Institutions

The Non-Banking Financial Company - Micro Finance Institutions (Reserve Bank) Directions, 2011

An NBFC-MFI is defined as a non-deposit taking NBFC (other than a company licensed under Section 25 of the Indian Companies Act, 1956)

1.      Net Owned Funds: There should be a Minimum Net Owned Funds of Rs.5 crore. (For NBFC-MFIs registered in the North Eastern Region of the country, the minimum NOF requirement shall be Rs.2 crore).

2.      Not less than 85% of its net assets are in the nature of “QUALIFYING ASSETS.”

“Qualifying asset” shall mean a loan which satisfies the following criteria:-

a.      loan disbursed by an NBFC-MFI to a borrower with a rural household annual income not exceeding Rs. 1,00,000 or urban and semi-urban household income not exceeding Rs. 1,60,000 ;

b.      loan amount does not exceed Rs. 60,000 in the first cycle and Rs. 1,00,000 in subsequent cycles;

c.       total indebtedness of the borrower does not exceed Rs.1,00,000 provided that loan, if any availed towards meeting education and medical expenses shall be excluded while arriving at the total indebtedness of a borrower;

d.      tenure of the loan not to be less than 24 months for loan amount in excess of Rs. 30,000 with prepayment without penalty;

e.      loan to be extended without collateral;

f.        aggregate amount of loans, given for income generation, is not less than 50 per cent of the total loans given by the MFIs g. loan is repayable on weekly, fortnightly or monthly installments at the choice of the borrower

3.      An NBFC which does not qualify as an NBFC-MFI shall not extend loans to micro finance sector, which in aggregate exceed 10% of its total assets.

4.      Maintenance of minimum CRAR: All new NBFC-MFIs shall maintain a Capital Adequacy Ratio consisting of Tier I and Tier II Capital which shall not be less than 15 % of its aggregate risk weighted assets.

5.      Components in pricing of loan: There shall be only three components in the pricing of the loan viz. the interest charge, the processing charge and the insurance premium (which includes the administrative charges in respect thereof).

6.      There will be no penalty charged on delayed payment.

7.      No provision of Security Deposit: NBFC-MFIs shall not collect any Security Deposit/ Margin from the borrower.

8.      There should be a standard form of loan agreement.

9.      Contents of Loan Card: Every NBFC-MFI should provide to the borrower a loan card reflecting

(i)                 the effective rate of interest charged;

(ii)               all other terms and conditions attached to the loan;

(iii)             information which adequately identifies the borrower; and

(iv)              acknowledgements by the NBFC-MFI of all repayments including instalments received and the final discharge;

(v)                All entries in the Loan Card should be in the vernacular language.

10.  Display of ROI: The effective rate of interest charged by the NBFC-MFI should be prominently displayed in all its offices and in the literature issued by it and on its website.

11.  Pricing of ROI: NBFC-MFIs will ensure that the average interest rate on loans during a financial year does not exceed the average borrowing cost during that financial year plus the margin, within the prescribed cap. Moreover, while the rate of interest on individual loans may exceed 26%, the maximum variance permitted for individual loans between the minimum and maximum interest rate cannot exceed 4 per cent.

12.  Not more than two NBFC-MFIs should lend to the same borrower.

13.  Applicability of Corporate Governance Norms: The Master Circular issued for NBFCs on Corporate Governance dated July 01, 2015 shall be applicable to NBFC-MFIs also.

14.  Submission of Statutory Auditor Certificate: All NBFCs are required to submit Statutory Auditors Certificate with reference to the position of the company as at end of the financial year ended March 31 every year.

15.  Applicability of Fair Practice Code: All elements of the Fair Practices Code issued by the Bank vide its Master Circular in this regard dated July 1, 2015 will need to be adhered to by the NBFCMFIs.

16.  Online Returns to be submitted:

S.No.	Return	Due Date	Period
ONLINE RBI RETURNS
1.	NBS-7	Within 15 days of end of Quarter	Quarterly
2.	NDSI – 500cr.	Within 15 days of end of Quarter	Quarterly
3.	ALM – 1	Within 15 days of end of Quarter	Quarterly
4.	Branch Info	Within 15 days of end of Quarter	Quarterly
5.	ALM 2 & 3	Within 30 days of the end of half year	Half Yearly
6.	ALM – Yearly	Within 15 days of end of year	Yearly
FRAUD RETURNS
1.	FMR – 1	Within 3 weeks from detection	-
2.	FMR – 2	Within 15 days of end of Quarter	Quarterly
3.	FMR – 3	Within 15 days of end of Quarter	Quarterly
4.	FMR - 4	Within 15 days of end of Quarter	Quarterly

References:

RBI - Master Circular - MFI

Contact:

CS Divyanshu Bansal

Email ID: divyanshubansal401@gmail.com

Ph: +91-9958381905