MUMBAI : Micro finance institutions would be allowed to charge interest rates lower than the average base rate of five largest commercial banks by assets multiplied by 2.75 or lower than their cost of funds plus margin as indicated in the company circular, the Reserve Bank of India said. The norms would take effect from April. 

The average base rate of the five largest banks, i.e. SBI, ICICI Bank, Axis Bank, PNB and Canara Bank works out to 10.15%, which when multiplied by 2.75 the interest rate works out to 27.91%.

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