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    Question

    Which of the following is not a correct feature of a

    microfinance loan as per RBI’s guidelines?
    A It is collateral-free. Correct Answer Incorrect Answer
    B It is provided to low-income households with annual household income of up to ₹2 lakh. Correct Answer Incorrect Answer
    C It cannot be lien-marked to the borrower’s deposit account. Correct Answer Incorrect Answer
    D It allows flexibility in repayment periodicity. Correct Answer Incorrect Answer
    E It carries no prepayment penalty. Correct Answer Incorrect Answer

    Solution

    As per RBI’s Harmonised Regulatory Framework for Microfinance Loans (2022), the key features are: • Collateral-free → All microfinance loans must be unsecured. • Eligibility → Available to households with annual income of up to ₹3,00,000 (not ₹2,00,000). • No lien-marking → The loan cannot be linked with or secured against the borrower’s deposit account. • Repayment flexibility → Lenders must offer repayment schedules (weekly, fortnightly, or monthly) as per borrower convenience. • No prepayment penalty → Borrowers can prepay without additional charges. Penalty, if any, is only on overdue amounts.

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