RBI's Master Direction on NBFC-MFI (2022) replaced the earlier 2011 framework, introducing income-based borrower eligibility criteria instead of asset-based limits. Annual household income cap set at ₹3 lakh (rural) and ₹2 lakh (urban). Pricing regulations include margin cap of 12% over cost of funds. Loan tenure extended to 36 months from 24 months. Board-approved fair practices code mandatory. Aims to balance financial inclusion with borrower protection while addressing over-indebtedness concerns in microfinance sector.

The revised NBFC-MFI framework addresses systemic issues that emerged post-Andhra Pradesh microfinance crisis (2010). Key shift from asset-based to income-based borrower classification reflects ground reality where rural households may own assets but lack regular income. The 12% margin cap over cost of funds replaces the earlier complex pricing formula, providing transparency while ensuring viability. Extended loan tenure (36 months) allows better cash flow management for borrowers engaged in agriculture and small businesses. The framework also permits prepayment without penalty and mandates grievance redressal mechanisms. Digital lending guidelines integration ensures technology adoption doesn't compromise borrower rights. This regulation balances RBI's financial inclusion mandate with prudential oversight, particularly relevant as microfinance penetration deepens in rural India. The framework also addresses concerns about multiple lending and debt traps by strengthening due diligence requirements. It recognizes microfinance as a distinct business model requiring specialized regulation, moving away from one-size-fits-all NBFC norms.