A Business Encyclopedia

Non-Banking Financial Company-Micro Finance Institution

Definition: The Non-Banking Financial Company: Micro Finance Institution (NBFC-MFI) is a non-deposit taking financial company that has minimum 85% of its assets in the nature of qualifying assets. The Qualifying Assets are those assets which have a substantial period of time to be ready for its intended use or sale.

As per RBI, for a non-banking financial company to be recognized as a microfinance institution must satisfy the following conditions:

  • Loan to be disbursed to the borrower with a rural household annual income shall not exceed Rs 1,00,000 and in the case of the urban and semi-urban household income not exceeding Rs 1,60,000.
  • The amount of a loan shall not exceed Rs 50,000 in the first cycle and Rs 1,00,000 in the subsequent cycles.
  • The tenure of the loan for the amount exceeding Rs 15,000 (with prepayment without penalty) must not be less than 24 months.
  • The total indebtedness of the borrower shall not exceed Rs 1,00,000.
  • The loan shall be disbursed without any collaterals.
  • An aggregate of total loans given for income generation shall not be less than 50% of the total loans given by the MFI.
  • The loan is repayable either weekly, fortnightly or monthly, depending on the choice of the borrower.

Thus, by fulfilling all the above conditions any non-banking finance company can perform the operations of a micro-finance institution.

Leave a Reply

Your email address will not be published. Required fields are marked *


Related pages

market oriented pricing strategyethic of virtuewhat is cardialbases for segmentationordinal theorymoratorium period meaningpure competition market structurecarrot and stick theoryspot transaction examplehow to calculate consumer equilibriumraymond cattell trait theory of personalitydefinition of participative managementdebentures meaning in accountingfactoring definition in financecurrency swaps meaningmonopolistic competition definetypes of ethical theoryselloffsisoquants and their propertiesleveraged leaseschumpeter entrepreneur definitionpearson correlation meaningdemand forecasting methods for new productsdefinition of decoding in communication processtaylor scientific management approachmeaning of repo raterevitalized meaningnps definitionjudgement samplingexpansionist definitionapprenticeship training definitionexplain marginal rate of substitutionmanagement principles of henri fayolwhat is snowball sampling in researchdefinition of pert chartmeaning of debenturedefine mncwhat is an intrapreneurhindi meaning of contingencyinformal communication in businesssteps in hr planning processdefine moratoriumsequity theory in relationshipsmeaning divestmentprovident fund definitionmeaning of holistic in hindiweber bureaucracyvestibule meaningindifference curves economicsclassical conditioning theory of ivan pavlovexplain income elasticity of demandmonetizing debt definitionretrenchment definitionfactors determining elasticity of demandmeaning of dialecticdefinition subordinatesscientific management taylorconcentric and conglomerate diversificationvague meaning in urduadams theory of equityapplication of henri fayol 14 principles of managementcardinal measure of utilityprinciples of management of henri fayolnpv definedsegmentation bases marketingwhat is cyclical unemploymentnsc withdrawal before maturitydefine takeoversconsumer equilibrium through indifference curvedefine divestsemployment provident fund organisationexplain the term whistleblowingmeaning of quota samplingretained earnings represent