The banking and monetary regulator, RBI might loosen up the norms for non banking finance companies (NBFC) and micro finance institutions (MFI). This comes as a breather after RBI recently tightened the Loan to value (LTV) and adequacy norms for the NBFC and MFIs.

The RBI is considering extending the deadlines on the norms relating to loan tenor, income cap for the borrower, et al. Recently MFIs approached RBI with their inability to meet the requirement, and the move is suggested to be a result of the same.

One of the people close to the happenings stated, "The modified guidelines are expected in the next few weeks. RBI has taken feedback from the industry and is currently working on the modified rules."

The current guidelines have mandated the NBFC-MFIs have a cap on annual income of the borrowers; Rs. 60,000 for rural households and Rs. 1.5 lakh for urban and semi-urban households. The tenor for loan repayment was set at 2 years or more if the loan exceeded Rs. 15,000. The MFIs should have 85% of their borrowers in the above category.

RBI stated that if NBFC-MFIs fail to meet the requirements, they'd be cut off from access to commercial banks for borrowing money at lower rates. RBI has also asked banks to make 100% provisioning for loans which were overdue for more than 180 days. The deadline for which was 1st March 2013, which is expected to be extended further.

Industry insiders say that it would be difficult to determine the actual income of the borrowers since they do not have documented income. The MFI incomes have shrunk to 50% in last two years after the Andhra Pradesh government prevented them to make weekly recovery.