The Reserve Bank of India (RBI) has expressed concern over the lack of reduction in lending rates for microfinance borrowers. Despite guidelines in March 2022 aimed at reducing borrowing costs, rates have reportedly increased, reaching a five-year high of 24.7%. This situation goes against the intent of the earlier guidelines. Market sources attribute some of this increase to repo rate hikes.
Non-banking financial companies (NBFCs) have defended their rates due to higher borrowing costs, while banks face the challenge of competitive pricing. The RBI is advocating for a graded pricing mechanism, where different categories of borrowers are offered varying rates based on their credit history and relationship with the lender, which could potentially lead to lower borrowing costs.