The macro-challenges of micro-lenders

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The freedom to set interest rates encouraged a few MFIs to raise rates from day one. It will take time for borrowers to take advantage of this as products, processes and digitization evolve

Topics
RBI | BS Reviews | microfinance

In 2011, when the Reserve Bank of India (RBI) liberalized savings bank interest rates, a few private banks rushed to raise the rate to woo customers. More than a decade later, when India’s banking regulator released lending rates for micro-loans last month, some micro-lenders followed suit, rushing to raise their lending rates from day one.

In the first case, consumers benefited while banks, over a period of time, captured a larger share of savings deposits. In the second case, consumers are the beneficiaries because they have to pay more to obtain micro-loans. The …




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First published: Sun 01 May 2022. 21:52 IST

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