What changed
Previously, margin caps varied by NBFC size. Now, a single 12% margin cap applies to all NBFC-MFIs until March 31, 2014. After that, the cap splits: 10% for large MFIs with portfolios above Rs.100 crore, and 12% for smaller ones.
What it means for you
NBFC-MFIs must immediately cap their margins at 12% to comply. Larger MFIs face a tighter 10% cap from April 2014, which will compress their net interest margins. All lenders need to review their pricing models and operational efficiency to maintain profitability under the new caps.
What you must do
- Ensure your NBFC-MFI's margin does not exceed 12% until March 31, 2014.
- Prepare for the lower 10% margin cap from April 1, 2014, if your loan portfolio exceeds Rs.100 crore.
- Review and adjust interest rates and fee structures to align with the applicable margin cap.
- Monitor your loan portfolio size to determine which margin cap applies from April 2014.
Who it affects
All NBFC-MFIs, Large MFIs with loan portfolios over Rs.100 crore, Smaller NBFC-MFIs
What is the margin cap for NBFC-MFIs until March 31, 2014?
The margin cap is 12% for all NBFC-MFIs, regardless of their size.
What changes from April 1, 2014?
From April 1, 2014, large MFIs with loan portfolios exceeding Rs.100 crore must not exceed a 10% margin cap, while others continue with a 12% cap.