RBI removes 26% interest rate cap on MFI loans

The Reserve Bank of India (RBI) has removed the 26% interest rate cap on loans given by micro finance companies regulated by it and linked the interest rate to the cost of funds, providing a greater leeway to the lenders from April 1. RBI said the micro finance institutions (MFIs) should arrive at the lending rate by calculating their cost of funds plus a maximum 10% margin or the average base rate of the five largest commercial banks by assets multiplied by 2.75 times, whichever is lower.