MFI Charging Flat Rate Interest Instead of Reducing Balance
Your MFI is calculating interest on the original loan amount for the entire tenure (flat rate method) instead of on the reducing balance. This means you are paying interest on money you have already repaid, significantly inflating the effective interest rate.
⚖️Your Rights Under RBI Regulations
RBI mandates that all microfinance loans must use the reducing balance method for interest calculation.
The difference between flat rate and reducing balance on a typical MFI loan can be Rs.8,000–10,000 on a Rs.50,000 loan.
If your MFI uses flat rate, every repayment has included an overcharge — the excess is recoverable.
You have the right to demand a full calculation showing the reducing balance method.
💰 What You Can Recover
Refund of excess interest paid due to flat rate calculation vs the correct reducing balance amount.
⏱ Response Deadline
Write to MFI's Grievance Redressal Officer — 30 days for response.
📋Step-by-Step — What to Do
Ask the MFI in writing for the loan repayment schedule showing the interest calculation method.
Calculate the difference between flat rate and reducing balance for your loan amount and tenure.
Write to the GRO with your calculation demanding refund of the excess.
File with RBI Ombudsman at cms.rbi.org.in (select NBFC) or with Sa-Dhan / MFIN (SROs).
🏛 Where to Escalate If Bank Doesn't Respond
RBI Integrated Ombudsman + Sa-Dhan (sadhan.net) + MFIN (mfinindia.org)
Facing this issue with your Bank, NBFC, MFI, SFB or Fintech?
AI merit analysis + expert-drafted RBI-backed communication. Starting at ₹199.
File Complaint →Check my rights first →Use our Free Instant Rights Tool — type your problem, get your exact rights in seconds.
Check My Rights Free →