New Delhi, Aug 5 (IANS) The National Bank for Agriculture and Rural Development (NABARD) and the Reserve Bank of India (RBI) have undertaken various interventions to promote financial literacy and awareness among the rural population, including microfinance borrowers, the Parliament was informed on Tuesday.

The Centre for Financial Literacy (CFL) project has been initiated by the RBI since 2017 with an objective to adopt community-led, innovative, and participatory approaches to financial literacy. A total of 2,421 CFLs have been set up across the country as on March 31, 2025, with each CFL covering three blocks on average, Minister of State for Finance Pankaj Chaudhary said in a written reply to a question in the Rajya Sabha.

The NABARD has been providing financial support for the conduct of financial and digital literacy camps through rural bank branches and Financial Literacy Centres (FLCs) in areas with limited awareness. These programmes entail generating awareness on various banking products, social security schemes of the Centre, digital banking, mobile banking and cyber security, he stated.

The minister highlighted that the NABARD also sponsors village-level programmes, which are conducted with the support of banks and State Rural Livelihoods Missions for a better interface between bankers and Self-Help Groups (SHGs) to facilitate opening of SHG accounts, their credit linkage and regular loan repayments, thereby facilitating financial inclusion at the village level.

The steps taken by the RBI for enabling ease of access to credit in the microfinance sector include simplifying the definition of microfinance loans and removing various quantitative restrictions on loans given by NBFC-MFIs. Presently, all collateral-free loans given to a household having an annual household income up to Rs 3,00,000 are considered as microfinance loans, the minister said.

The erstwhile requirement of providing a minimum of 50 per cent loans for income generation purposes has been dispensed with, considering the need for credit for medical, educational and income smoothening purposes.

The RBI has also taken measures to enhance borrower protection, such as a ceiling of 50 per cent on the monthly loan repayment obligations as a percentage of monthly income has been prescribed to protect customers from over indebtedness.

It has also issued specific guidelines for recovery processes, which have to be followed by NBFCs and banks to ensure protection to the borrowers against harsh recovery methods.

Besides, the RBI has informed that interest rates charged to microfinance borrowers by all banks and NBFCs which had access to low-cost funds hovered around the regulatory ceiling introduced by the RBI from time to time. The RBI’s regulations prescribe that interest rates and other charges shall not be usurious.

SROs for the microfinance sector, Sa-Dhan, and Microfinance Industry Network (MFIN) also play a major role in strengthening compliance culture among their members. Further, Sa-Dhan and MFIN have issued guardrails for their members, capping the total indebtedness of a borrower as well as limiting the number of lenders that can give loans to a single borrower. Such interventions aid in reducing the indebtedness of the borrowers, the minister added.

–IANS

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