Banks cautious on MFI lending despite RBI cutting risk weights

Banks are expected to tread cautiously in lending to the microfinance sector despite the Reserve Bank of India reducing risk weights for such loans.

- SACHIN KUMAR

They will wait for delinquencies to decline in the microfinance industry before increasing their exposure.

Banks will also monitor the effects of a new regulation proposed by the Microfinance Industry Network (MFIN), reducing the maximum number of lenders per borrower from four to three. The new rule will come into effect from April 1.