Which one of the following statements about a borrower from a Microfinance Company is not correct?

According to the Reserve Bank of India's regulatory framework, a microfinance loan is explicitly defined as a collateral-free loan [1]. Therefore, a borrower is not required to offer collateral, and the loan cannot be linked to a lien on the borrower's deposit account. Regarding the other options: (1) The borrower must belong to a low-income household with an annual income not exceeding ₹3,00,000 [1]. (2) While the RBI removed specific loan amount caps in 2022 to move toward principle-based oversight, self-regulatory organizations (SROs) like MFIN have introduced guardrails such as a ₹1.5 lakh (₹0.15 million) loan limit per borrower to prevent over-indebtedness. (4) While interest rate ceilings were removed to allow risk-based pricing, lenders must disclose all rates in a standardized factsheet, and borrowers are obligated to pay the agreed-upon interest as part of their repayment obligations, which are capped at 50% of household income.

Sources

1. [1] https://www.rbi.org.in/commonman/english/scripts/FAQs.aspx?Id=3366