The definition of microfinance loans for ‘not for profit’ companies (registered under Section 8 of the Companies Act, 2013) is now aligned with the revised definition of microfinance loans viz., collateral-free loans to households with annual household income up to INR 3,00,000, provided the monthly loan obligations of a household does not exceed 50 per cent of the monthly household income.
Interpretation is that loan amount to people who covered under section 8 microfinance company can be increased, it may be increased up to INR 2,40,000/- .
Interest rates and other charges/ fees on microfinance loans should not be usurious/high. These shall be subjected to supervisory scrutiny by the Reserve Bank,” Also conveyed that each borrower will get one loan card from lender in which every detail of loan to be mentioned like loan amount, rate of interest, processing fees, penalty etc.
If the asset size of Section 8 microfinance company is increasing more than 100 Crore, then within three months company has to apply for conversion into NBFC-MFI, there will be no need to convert NON-PROFIT ORGANISATION INTO PROFIT ORGANISATION.
In short RBI promoting microfinance and as well getting concerned toward Section 8 Microfinance companies, Here “Cashpor Micro Credit” is the biggest example.
Section 8 microfinance companies are getting recognition from RBI to provide microfinance or credit facility to the poor section for their upliftment. It as a new paradigm, with immense potential and was very supportive for its growth.
How SECTION 8 MICROFINANCE is helping poor households and businesses?
• Microfinance helps low-income households to stabilize their income flows and save for future needs. In good times, microfinance helps families and small businesses to prosper, and at times of crisis it can help them cope and rebuild.
• Many micro, small, and medium-sized enterprises (MSMEs) are women-led and owned, so providing them with better financial options will improve women’s livelihoods and incomes.
• Microfinance services are helping rural women gain financial independence and empowering them to make good decisions.
• Small businesses in regional towns need financing sources to help them maintain operations, invest in technologies, and grow businesses. More financing helps to create growth opportunities for business and new jobs.
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