The Reserve Bank of India (RBI) will review the annual household income threshold of Rs 3 lakh for microfinance borrowers, Deputy Governor Shirish Chandra Murmu has said, according to PTI and IANS reports from Mumbai on 15 November 2026.

Source: PTI via Rediff Moneynews

Speaking at an event organised by the Microfinance Institutions Network (MFIN) in Mumbai, Murmu said the central bank would assess the need for revising the threshold in light of developments in the microfinance sector, responding to industry demands to raise the limit.

He stressed, however, that microfinance institutions must strengthen their household income assessment and reporting processes to maintain credibility and prevent misuse of any change in regulatory thresholds.

On the industry's other demand — revising the 50 per cent cap on a household's monthly loan repayment-to-income ratio, known as the fixed obligation-to-income ratio (FOIR), by excluding the principal component of certain loans — Murmu opposed the proposal. He said such exclusions would undermine the safeguard's objective, dilute its sanctity and understate household indebtedness.

The 50 per cent cap is intended to protect borrowers from excessive debt while ensuring a reasonable share of household income remains for essential consumption, he said, describing the existing limit as already liberal. Reports citing his remarks said the average microfinance borrower spends about 18.7 per cent of monthly household income on loan repayments.

Murmu also flagged that prolonged geopolitical challenges and extreme climate events may disproportionately impact low-income households, and urged microlenders to strengthen their practices and ensure fair and competitive lending rates, PTI reported. No timeline was given for when the income threshold review would conclude.