MFI (Microfinance Institution)

Microfinance Institutions are RBI-regulated NBFCs (formally NBFC-MFIs) that serve low-income borrowers — predominantly rural and semi-urban households earning under ₹3 lakh annually. MFI loans are unsecured, typically range from ₹50,000 to ₹1,25,000, and are often structured through Joint Liability Groups (JLGs) where 5–10 borrowers cross-guarantee each other's repayment. The MFI sector serves over 7 crore borrowers in India and is the primary credit source for the segment underserved by traditional banks. RBI's 2022 MFI framework standardised pricing transparency, mandatory disclosure of effective interest rates, and FOIR limits.