<h1>RBI Caps Microfinance Loan Interest at 26%, Sets 12% Margin Limit, and Bans Penalties for Late Payments.</h1> Concerns have been raised about high interest rates and coercive recovery methods by some microfinance institutions (MFIs). In response, the Reserve Bank of India (RBI) formed a sub-committee to address these issues and propose solutions for fairer interest rates. The sub-committee, led by a director from the RBI's board, has submitted its report. Following this, the RBI issued a circular classifying bank loans to MFIs as priority sector lending, capping margins at 12%, setting a 26% annual interest cap on individual loans, and prohibiting penalties for delayed payments or security deposits. This information was shared by the Minister of State for Finance in the Rajya Sabha.