Bandhan Bank CEO Says Microcredit Is Business Credit: What It Means for Small Borrowers

Bandhan Bank's chief executive says microcredit should be treated as business credit, not as a personal loan. This was reported by Business Standard. The idea is that tiny loans usually fund work that earns money.

Why does this matter to you? The label affects how lenders judge a loan and how rules group it. Maybe you borrow small amounts for a shop, a sewing machine or a cow. Then it helps to know which bucket your loan is in.

Key takeaways

• As reported by Business Standard, Bandhan Bank's CEO calls microcredit business credit, not personal credit.
• Microcredit usually funds work that earns money, like a small shop or a dairy animal.
• A personal loan is meant for personal needs and is judged mostly on salary and credit score.
• The headline doesn't say any rule has changed, so don't assume your loan terms will change.
• Compare the total cost of a loan, not just the EMI.

How microcredit works in simple terms

Microcredit means very small loans. They often go to women and low-income families. Many are given through groups, where members support each other and repay in small, regular amounts.

A personal loan is different. A bank gives it to one person, and it can be used for almost anything. That could be a wedding, a hospital bill or a trip. The lender checks your salary, your credit score and any EMIs you already pay. An EMI is the fixed amount you pay every month.

The CEO's argument, as reported, is that microcredit sits closer to business lending. The money is used to earn, not just to spend. That's the logic behind the label.

RBI also treats microfinance loans as their own group. The rules cover things like the household income limit and how lenders set prices. You can check the current details on the RBI website.

What changes for borrowers

The headline alone doesn't tell us that any rule has changed. It's a view on how to classify small loans. Still, the label can shape how a loan is priced and judged.

Here's a simple example. Take a ₹30,000 loan repaid over 12 months. The rates below are only for illustration, not quotes from any lender.

Loan type	Amount	Yearly rate (example)	Monthly EMI	Interest over 12 months
Microcredit loan	₹30,000	24%	₹2,837	₹4,042
Microcredit loan	₹30,000	20%	₹2,779	₹3,348
Personal loan	₹30,000	16%	₹2,721	₹2,651

At 24%, the borrower pays about ₹1,400 more in interest than at 16%. Small, unsecured loans often cost more because they're costly for lenders to give and collect. A higher rate isn't always a bad deal. A personal loan may simply not be open to you.

You can test your own numbers with the EMI calculators. Also look at current interest rates before you decide.

Who is affected

The label matters most to a few groups of people:

• Women in self-help or joint-liability groups who borrow for a small trade.
• Shopkeepers, vendors and farmers who use small loans to buy stock or tools.
• Self-employed people who currently use personal loans to fund their work.
• Banks and lenders that report and manage these loans.

If you earn a salary and borrow for personal needs, your loan stays a personal loan. Our personal loan guides cover that route.

What to do now

You don't need to act in a hurry. A few simple checks will protect you:

1. Write down why you need the money. Is it for earning or for spending?
2. Ask the lender for the total cost, including fees and insurance.
3. Compare at least two offers. Look at the yearly rate and the total you'll repay.
4. Check your eligibility before you apply, so you avoid needless rejections.
5. Keep all your EMIs well below half of your monthly income.
6. Never borrow from an app or agent that isn't on the RBI list of registered lenders.

Frequently asked questions

Is microcredit a personal loan?

According to the Bandhan Bank CEO, as reported, it isn't. He sees it as business credit because the money is used to earn. Your lender's own loan papers will show how your loan is classed.

Will my EMI change after this statement?

No change has been reported. This is a view on classification, not a new rule. Your EMI follows the terms you signed.

Should I take a personal loan instead of microcredit?

Only if you qualify and it costs less in total. Compare the yearly rate, fees and repayment time first. Pick the loan that matches how you'll earn the money back.