Review of Risk Weights on Microfinance Loans

RBI has clarified that microfinance loans which are not in the nature of consumer credit and fulfil all the four criteria may be classified under RRP provided that the banks put in place appropriate policies and standard operating procedures to ensure fulfilment of the qualifying criteria.

Regional Rural Banks (RRBs) and Local Area Banks

1. All microfinance loans extended by RRBs and LABs shall attract a risk weight of 100 per cent.
2. The above instructions shall be applicable from the date of issue of this circular in respect of outstanding as well as new microfinance loans.