MFIN, a self-regulatory organization for the microfinance industry, recommends limiting micro-credit indebtedness per borrower to Rs two lakh and capping the number of lenders to four per debtor. This aims to alleviate repayment burdens, while also urging credit information companies to enhance data quality for better underwriting.

MFIN, a self-regulatory organization in the microfinance industry, on Tuesday proposed limiting micro-credit indebtedness per borrower to Rs two lakh and restricting the number of lenders to a maximum of four per debtor.

With 80% of micro-loans having a tenure of 18 months or more, the Rs two lakh cap would significantly reduce repayment obligations for borrowers, the organization stated. This policy is intended to ensure household incomes are carefully assessed to prevent borrowers from being overextended.

MFIN also urged credit information companies to improve data quality for underwriting purposes, emphasizing the industry's commitment to fostering responsible lending practices and promoting steady sector growth. Serving nearly 7.8 crore borrowers with an annual income under Rs three lakh, the sector's gross loan portfolio now stands at Rs 4.33 lakh crore.

(Disclaimer: With inputs from agencies.)