Q. Consider the following statements:

1. The bank loans to all MFIs including NBFCs working as MFIs are deemed to be the priority sector loans
2. The highest loan amount for an individual borrower, is Rs 25,000 with an interest rate cap of 24 per cent as recommended by Malegam Committee

Which among the above statements is / are correct?
Answer: Both 1 & 2
Notes: Both statements are correct. 1. Priority Sector Loans: In India, loans to Microfinance Institutions (MFIs), including Non-Banking Financial Companies (NBFCs) functioning as MFIs, are classified as priority sector loans. This classification aims to promote financial inclusion and support small borrowers. 2. Malegam Committee Recommendations: The Malegam Committee, established in 2011 to review the microfinance sector, recommended that the maximum loan amount for an individual borrower should be Rs 25,000, with an interest rate cap of 24%. This was aimed at protecting borrowers from excessive interest rates and ensuring responsible lending practices. Thus, both statements accurately reflect the regulatory framework governing MFIs in India.