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With respect to the RBI’s recent guidelines on microfinance sector, consider the following statements:
1. The microfinance loan is defined as a collateral-free loan given to a household, having an annual household income upto Rs. 3 lakhs.
2. The guidelines have been made applicable only to the NBFC-MFIs.
3. The RBI has decided to fix a ceiling on the interest rates charged by the financial institutions on the microfinance loans.
Which of the statements given above is/are correct?
- a)1 only
- b)1 and 2 only
- c)2 and 3 only
- d)1 and 3 only
Correct answer is option 'A'. Can you explain this answer?
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Most Upvoted Answer
With respect to the RBI’s recent guidelines on microfinance sect...
The RBI’s Guidelines on Microfinance Sector: In March, 2022, the RBI has introduced new guidelines for the microfinance sector. Applicability: All commercial banks (Including the RRBs, Small Finance Banks and Local Area Banks) + Cooperative Banks + NBFCs (NBFC-MFIs and Housing Finance Companies).
Definition of Microfinance Loan: Collateral-free loan given to a household, having an annual household income upto Rs. 3 lakhs. Given irrespective of end-use and mode of disbursal (either through physical or digital channels). Flexibility of repayment as per the borrowers’ requirement.
Limit on Loan Repayment Obligation: Loan repayment obligation should not be more than 50% of the monthly household income. Pricing of Loans: Earlier, the commercial banks were given a free hand to fix interest rates on microfinance loans. However, the RBI used to fix a ceiling on the interest rates on the loans given by the NBFC-MFIs. Now, the RBI has given free hand to all entities to fix their own interest rates on microfinance loans. However, at the same time, the RBI has highlighted that interest rates and other charges/fees on microfinance loans should not be usurious and shall be subjected to supervisory scrutiny.
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With respect to the RBI’s recent guidelines on microfinance sect...
Understanding the RBI Guidelines on Microfinance
The recent guidelines issued by the Reserve Bank of India (RBI) regarding the microfinance sector have sparked considerable interest. Let's evaluate the statements presented.
Statement 1: Definition of Microfinance Loan
- The microfinance loan is defined as a collateral-free loan given to a household with an annual income of up to Rs. 3 lakhs.
- This statement is correct. The RBI has established this criterion to ensure that microfinance is targeted at low-income households, promoting financial inclusion.
Statement 2: Applicability of Guidelines
- The guidelines have been made applicable only to NBFC-MFIs (Non-Banking Financial Company-Micro Finance Institutions).
- This statement is incorrect. While NBFC-MFIs are a significant focus, the guidelines also apply to other financial institutions involved in microfinance, including banks and small finance banks.
Statement 3: Ceiling on Interest Rates
- The RBI has decided to fix a ceiling on the interest rates charged by financial institutions on microfinance loans.
- This statement is also correct. The RBI aims to protect borrowers from exorbitant interest rates, ensuring that the microfinance sector remains sustainable and beneficial for low-income households.
Conclusion
Based on the analysis:
- Statement 1 is correct.
- Statement 2 is incorrect.
- Statement 3 is correct.
Thus, the correct statements are 1 and 3, aligning with option 'A' as the right answer.
The recent guidelines issued by the Reserve Bank of India (RBI) regarding the microfinance sector have sparked considerable interest. Let's evaluate the statements presented.
Statement 1: Definition of Microfinance Loan
- The microfinance loan is defined as a collateral-free loan given to a household with an annual income of up to Rs. 3 lakhs.
- This statement is correct. The RBI has established this criterion to ensure that microfinance is targeted at low-income households, promoting financial inclusion.
Statement 2: Applicability of Guidelines
- The guidelines have been made applicable only to NBFC-MFIs (Non-Banking Financial Company-Micro Finance Institutions).
- This statement is incorrect. While NBFC-MFIs are a significant focus, the guidelines also apply to other financial institutions involved in microfinance, including banks and small finance banks.
Statement 3: Ceiling on Interest Rates
- The RBI has decided to fix a ceiling on the interest rates charged by financial institutions on microfinance loans.
- This statement is also correct. The RBI aims to protect borrowers from exorbitant interest rates, ensuring that the microfinance sector remains sustainable and beneficial for low-income households.
Conclusion
Based on the analysis:
- Statement 1 is correct.
- Statement 2 is incorrect.
- Statement 3 is correct.
Thus, the correct statements are 1 and 3, aligning with option 'A' as the right answer.
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With respect to the RBI’s recent guidelines on microfinance sector, consider the following statements:1. The microfinance loan is defined as a collateral-free loan given to a household, having an annual household income upto Rs. 3 lakhs.2. The guidelines have been made applicable only to the NBFC-MFIs.3. The RBI has decided to fix a ceiling on the interest rates charged by the financial institutions on the microfinance loans.Which of the statements given above is/are correct?a)1 onlyb)1 and 2 onlyc)2 and 3 onlyd)1 and 3 onlyCorrect answer is option 'A'. Can you explain this answer?
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With respect to the RBI’s recent guidelines on microfinance sector, consider the following statements:1. The microfinance loan is defined as a collateral-free loan given to a household, having an annual household income upto Rs. 3 lakhs.2. The guidelines have been made applicable only to the NBFC-MFIs.3. The RBI has decided to fix a ceiling on the interest rates charged by the financial institutions on the microfinance loans.Which of the statements given above is/are correct?a)1 onlyb)1 and 2 onlyc)2 and 3 onlyd)1 and 3 onlyCorrect answer is option 'A'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about With respect to the RBI’s recent guidelines on microfinance sector, consider the following statements:1. The microfinance loan is defined as a collateral-free loan given to a household, having an annual household income upto Rs. 3 lakhs.2. The guidelines have been made applicable only to the NBFC-MFIs.3. The RBI has decided to fix a ceiling on the interest rates charged by the financial institutions on the microfinance loans.Which of the statements given above is/are correct?a)1 onlyb)1 and 2 onlyc)2 and 3 onlyd)1 and 3 onlyCorrect answer is option 'A'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for With respect to the RBI’s recent guidelines on microfinance sector, consider the following statements:1. The microfinance loan is defined as a collateral-free loan given to a household, having an annual household income upto Rs. 3 lakhs.2. The guidelines have been made applicable only to the NBFC-MFIs.3. The RBI has decided to fix a ceiling on the interest rates charged by the financial institutions on the microfinance loans.Which of the statements given above is/are correct?a)1 onlyb)1 and 2 onlyc)2 and 3 onlyd)1 and 3 onlyCorrect answer is option 'A'. Can you explain this answer?.
With respect to the RBI’s recent guidelines on microfinance sector, consider the following statements:1. The microfinance loan is defined as a collateral-free loan given to a household, having an annual household income upto Rs. 3 lakhs.2. The guidelines have been made applicable only to the NBFC-MFIs.3. The RBI has decided to fix a ceiling on the interest rates charged by the financial institutions on the microfinance loans.Which of the statements given above is/are correct?a)1 onlyb)1 and 2 onlyc)2 and 3 onlyd)1 and 3 onlyCorrect answer is option 'A'. Can you explain this answer? for UPSC 2024 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about With respect to the RBI’s recent guidelines on microfinance sector, consider the following statements:1. The microfinance loan is defined as a collateral-free loan given to a household, having an annual household income upto Rs. 3 lakhs.2. The guidelines have been made applicable only to the NBFC-MFIs.3. The RBI has decided to fix a ceiling on the interest rates charged by the financial institutions on the microfinance loans.Which of the statements given above is/are correct?a)1 onlyb)1 and 2 onlyc)2 and 3 onlyd)1 and 3 onlyCorrect answer is option 'A'. Can you explain this answer? covers all topics & solutions for UPSC 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for With respect to the RBI’s recent guidelines on microfinance sector, consider the following statements:1. The microfinance loan is defined as a collateral-free loan given to a household, having an annual household income upto Rs. 3 lakhs.2. The guidelines have been made applicable only to the NBFC-MFIs.3. The RBI has decided to fix a ceiling on the interest rates charged by the financial institutions on the microfinance loans.Which of the statements given above is/are correct?a)1 onlyb)1 and 2 onlyc)2 and 3 onlyd)1 and 3 onlyCorrect answer is option 'A'. Can you explain this answer?.
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