Mumbai, November 15, 2026 (Yes Punjab News)
The Reserve Bank of India (RBI) may review the existing annual household income threshold of Rs 3 lakh for microfinance borrowers, if needed, Deputy Governor Shirish Chandra Murmu said on Sunday, indicating that the regulatory limit could be reconsidered in response to changes in the sector.
Speaking at an event organised by the Microfinance Institutions Network (MFIN), Murmu said the central bank would assess whether the income threshold needed revision. He, however, emphasised that microfinance institutions must strengthen their systems for assessing and reporting household incomes to ensure transparency and prevent misuse of regulatory changes.
On the industry’s demand to revise the 50 per cent cap on the household loan repayment-to-income ratio, also known as the fixed obligation-to-income ratio (FOIR), Murmu opposed excluding the principal component of certain loans from the calculation.
He cautioned that such exclusions could weaken the regulatory safeguard and result in an underestimation of household indebtedness.
The 50 per cent cap is intended to prevent low-income households from taking on excessive debt while ensuring that sufficient income remains available for essential consumption and living expenses. Murmu described the existing threshold as already liberal, given the limited financial cushion available to such households and their vulnerability to economic shocks.
Citing a recent study, he said the average microfinance borrower spends 18.7 per cent of monthly household income on loan repayments, while nearly two-thirds goes towards consumption.
He also referred to NABARD’s Rural Economic Conditions and Sentiments Surveys, which indicate that consumption and other expenses account for around three-fourths of monthly household income, leaving the balance for loan repayments and savings.
Murmu stressed that the FOIR limit should be treated as a prudential ceiling for risk management, not a borrowing target for every household.
He also flagged the steady rise in the average ticket size of microfinance loans, noting that larger loans were growing significantly while demand for smaller loans appeared to be weakening.
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