Non-Banking Financial Company – Micro Finance Institutions (Reserve Bank) Directions (consumer protection related)

India

(enacted in 2011)

The Non-Banking Financial Company – Micro Finance Institutions (NBFC-MFI) (Reserve Bank) Directions, issued by the Reserve Bank of India (RBI) on December 2, 2011, include several consumer protection rules in the regulatory framework for NBFI-MFIs. On pricing and transparency, it sets caps on interest and processing charges and limits other fees that can be imposed; it simplifies price structures and forbids the imposition of penalty charges; it requires a standard form for loan agreements; and it requires the effective interest rate to be published and prominently displayed in branches. On over-indebtedness, it takes steps to prevent multiple borrowing even within a single institution. It also limits an NBFC-MFI’s recovery methods.