Latest news with #MFIs
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Business Standard
11-06-2025
- Business
- Business Standard
Microfinance loan disbursal falls 25% to ₹1.12 trillion in FY25
Loan disbursed by microfinance institutions (MFIs) have declined by 25 per cent to Rs 1.12 trillion in FY25 reflecting stress in the sector. Loan amount of Rs 1,12,459 crore was disbursed in 2024-25 through 2.2 crore accounts, including disbursement of owned as well as managed portfolio, Microfinance Institution Network (MFIN), an umbrella body of the microfinance institutions (MFIs), said in its report released on Wednesday. MFIs loan disbursement in FY25 was 25.4 per cent lower than the amount disbursed in 2023-24, it said. However, the average loan amount disbursed per account during FY25 was Rs 50,131 which increased by 12.3 per cent in comparison to the last financial year. During the year, the report said, NBFC-MFIs received a total of Rs 57,307 crore in debt funding, a 35.7 per cent decrease from previous year. Banks contributed 78.4 per cent of the total borrowing received followed by non-bank entities 11.9 per cent, ECB 5.1 per cent, All India Financial Institution 3.1 per cent and others 1.5 per cent, it said. Total equity decreased by 1.8 per cent to Rs 35,759 crore as compared to previous year. During the quarter ended March 31, 2025, Asset Under Management (AUM) of MFIs came down by 11.9 per cent to Rs 1,47,279 crore. AUM decreased by 11.9 per cent compared to March 31, 2024 and decreased 2.4 per cent compared to December 31, 2024. In terms of regional distribution of portfolio (AUM), East and North-East accounts for 33 per cent of the total NBFC-MFI portfolio, South 28 per cent, North 17 per cent, West 14 per cent, and Central contributes 9 per cent. Last week, RBI Deputy Governor M Rajeshwar Rao said microfinance continues to suffer from the vicious cycle of over-indebtedness, high interest rates and harsh recovery practices. While microfinance has played an important role in financial inclusion, some issues need attention, Rao had said. "The sector continues to suffer from the vicious cycle of over-indebtedness, high interest rates and harsh recovery practices. While some moderation in interest rates charged on microfinance loans has been observed in recent quarters, pockets of high interest rates and elevated margins continue to persist," he had said.
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Business Standard
09-06-2025
- Business
- Business Standard
Five-Star, RBL, Bandhan Bank rally up to 18% in 2 days post RBI policy
Shares of financials firms mainly mid and small-sized banking, non-banking finance companies (NBFCs), micro finance institutions (MFIs) and housing finance companies continued to trade higher for the second straight day, surging up to 14 per cent on the BSE in Monday's intra-day trade amid heavy volumes. In the past two trading days, select stocks from these sectors have rallied by up to 18 per cent after the Reserve Bank of India (RBI) appointed monetary policy committee on Friday decided to cut the repo rate by 50 bps to 5.5 per cent vs. general expectations of 25 bps. Further, in a surprising move, the RBI also decided to cut the cash reserve ratio (CRR) by a massive 100 bps to 3.0 per cent of NDTL (Net demand and Time liabilities) in a staggered manner with equal cut of 25 bps being effective from fortnight beginning 6th September, 4th October, 1st November and 29th November. Capri Global Capital, Five-Star Business Finance, IIFL Finance, Bandhan Bank, Fedbank Financial Services, ESAF Small Finance Bank, RBL Bank, Fusion Finance, Muthoot Microfin, Jana Small Finance Bank, Arman Financial Services, Utkarsh Small Finance Bank and Capital Small Finance Bank from the BSE Financial Services index rallied between 5 per cent and 14 per cent in intra-day trade today. According to analysts at JM Financial Institutional Equities liquidity in the system is already in surplus of ₹3.0 trillion as on 5th June (~1.3 per cent of system deposits) and this CRR cut will inject additional primary liquidity to the tune of ₹2.5 trillion (~1.1 per cent of system deposits). With this surprise repo rate/ CRR cuts, RBI also changed its stance to 'Neutral' from 'Accommodative' highlighting limited scope to cut the rates further. As per brokerage firm rough calculations, ~100bps of repo rate cuts should lead to ~20-40bps of net interest margins (NIMs) cuts for banks depending upon respective loan mix, funding mix and maturity profile of TDs. CRR cut of ~100bps should lead to ~7-8bps of positive impact on NIMs which should partially cushion this negative impact coming out of repo rate cuts. Hence, this CRR cut should cushion ~20 per cent-30 per cent of total negative impact on NIMs coming out of repo rate cuts, analysts said in a sector report. ALSO READ | For NBFC/ mid banks having higher share of fixed rate loans, positive impact on NIMs is contingent upon yield trajectory despite benefits on cost of funding. Due to loan mix shifting towards secured loan segments and pricing pressure in secured loans driven by elevated competition is leading to pressure on yield. While banks may see near-term pressure on NIM due to mandatory 50 bps rate cuts on ~45 per cent of external benchmark-linked loans in the system, the reduction in CRR lowers the cost of funds and improves liquidity, offering offsetting support. Thus, margins are expected to bottom out in 1HFY26, amid repricing of term deposit rates and interest income from relaxation in CRR, ICICI Securities said in a note. According to analysts at Elara Capital, the RBI MPC meet was bold, going all in for growth. The front-loading of the 50 bps cut helps the RBI to extract policy space to counter near-term uncertainty emanating from trade and tariffs. A 100 bps CRR cut may help the RBI to manage liquidity tightness that is likely to arise from a possible unwinding of the RBI's short position in FX forward book of $52 billion. The lowering of CRR should also aid in transmission to lending rates. All in all, a bold move with a lot to look forward to. ALSO READ | Within banks, the brokerage firm sees early benefits accruing to mid-sized banks and to a few PSU banks with some time lag. Larger private banks may see front-ended impact given the higher proportion of External Benchmark based Lending Rate (EBLR). While pressure in the MFI segment continues, the RBI has highlighted that both banks and NBFCs have actively recalibrated their business strategies and credit underwriting models to align with evolving market conditions. The MFI segment is expected to stabilize in the next few quarters.
Time of India
09-06-2025
- Business
- Time of India
RBI's bold rate cut sets stage for market rally: Sandip Sabharwal
"I think most of the MFI-focused companies are trading at somewhat distressed valuations. And there were two comments, specifically, one that the RBI has clearly stated that they see easing stress on the unsecured loan book, so that is overall good for the financial sector, especially for NBFC and more specifically for MFIs," says Sandip Sabharwal , Where you see the markets headed today, the kind of fillip that we have seen on the Nifty on Friday, do you believe that is sustainable today and the sectors that have been leading over the course of last week, do you believe they will continue to lead this week as well? Sandip Sabharwal: Yes, I think so, because the RBI's actions were quite significant. And in fact, many other sectors like auto would also have participated much more, because they are very strong beneficiaries of the easing equity and rate cut cycle, but for the rare magnets issue. Otherwise, the autos would have done much better than what they did on Friday. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Bank Owned Properties For Sale In Bukit Batu (Prices May Surprise You) Foreclosed Homes | Search ads Search Now Undo And if that sector remains subdued due to concerns around these supplies and apparent shutdowns, etc, so at that time you could get opportunities to buy these stocks. Otherwise, what RBI has delivered combined with the kind of tax breaks which the government has given for the middle class this year, higher government spending, overall lower inflation , so it is a perfect combination for revival in economic growth and as that plays out, markets should also do well. The one point that I wanted to discuss is that this big bazooka that they have given, I mean, not just the policy rate cut, but even for the MFI sector, because this is one space within financials which did have quite a fair bit of stress. Tell me, how does this help the MFI sector? And would you be an investor here at all? Sandip Sabharwal: Yes, I think most of the MFI-focused companies are trading at somewhat distressed valuations. And there were two comments, specifically, one that the RBI has clearly stated that they see easing stress on the unsecured loan book, so that is overall good for the financial sector, especially for NBFC and more specifically for MFIs, although there would be some concerns related to some state government bringing out new laws, etc, where some specific company could get impacted, so that has to be more minutely analysed. But that comment combined with the fact that MFI lenders have the ability to diversify into other segments and still retain the MFI categorisation, I think that is a significant positive, because then risk can be maintained better in the balance sheet. So, overall, it is quite positive for the MFI sector, even for the gold lenders where the norms have been eased. So, something has been given to everyone. Live Events If you can just highlight some of your top favourites within the financial space. Well, of course, it is not just the MFIs, the gold financers, it is actually great news for many of these stocks, but which are your top bets within the financial space? Sandip Sabharwal: The larger bank can continue to do well, which include ICICI, HDFC, Axis, Kotak, etc. Some of the PSU banks could see a revival. So, because of the sheer underperformance, we have actually recently added into SBI also in our portfolios. The other part which could benefit, obviously the NBFCs benefit much more in a significant easing cycle than the banks, so NBFCs people have a wide choice like Manappuram, L&T Finance, Mahindra Financial, Bajaj Finance, etc, among the NBFCs. But then there are others also which could benefit. So, investors have a wide choice. But overall, for the NBFC sector, this what RBI has been doing over the last few months is a much more significant positive than banks per se because most large banks have 40-45% CASA deposits where the costing does not reduce so much immediately and it is more or less fixed, although most banks have cut rates by 25 basis points, but for NBFCs which tend to be bulk borrows, significant monetary easing is much more positive. The realty pack, where is it that you find comfort to buy a fresh or add-in or even some of the HFCs, for instance, maybe that is a better play. Sandip Sabharwal: I like diversified NBFCs better. So, I would focus on those because only focused housing finance companies will continue to face more and more margin pressures as the liquidity eases. So, it is better to be in the diversified space. On the real estate sector, obviously this benefits the real estate sector. But as of now, I am not finding comfort in buying into any of these real estate companies at these valuations because the run-ups in most in the near term has been very substantial be it the market leader something like DLF already valued from 600 odd to 850, 880 something, so the rallies over the last one or two months in most of the real estate counter has been so significant. It is tough to find value. But on correction, we could still evaluate. Where both the companies will actually see what they can do best. But it is a big issue that is now emerging for the auto companies specifically with the shortage of critical rare earth magnets rather coming in from China. What is your sense that how severe this could actually impact the Indian auto industry and other sectors as well, given the fact we have a lot of reliability on China when it comes to select magnets? Sandip Sabharwal: So, there is a lot of news to go on where the impacts could be. The direct impact is more on the auto side immediately but apparently be going to a electronics, etc. So, now it will depend on how fast. So, it is not a question of supply. The supply is there, the supply is not being given, so that is the issue. So, whether it will get resolved or not, we do not know. Overnight there has been some news flow that China has approved supplies to some European and US customers. So, the point is, is India going to be singled out or is this issue going to be resolved? So, there are too many moving pieces. So, we need to watch out for that. EVs apparently will be much more impacted. So, to that extent, companies which have bigger EV portfolio or greater reliance on EVs only or two-wheeler EV companies, etc, those might be impacted more if it does not get resolved over the next four to six months.
Economic Times
09-06-2025
- Business
- Economic Times
RBI's bold rate cut sets stage for market rally: Sandip Sabharwal
"I think most of the MFI-focused companies are trading at somewhat distressed valuations. And there were two comments, specifically, one that the RBI has clearly stated that they see easing stress on the unsecured loan book, so that is overall good for the financial sector, especially for NBFC and more specifically for MFIs," says Sandip Sabharwal, ADVERTISEMENT Where you see the markets headed today, the kind of fillip that we have seen on the Nifty on Friday, do you believe that is sustainable today and the sectors that have been leading over the course of last week, do you believe they will continue to lead this week as well? Sandip Sabharwal: Yes, I think so, because the RBI's actions were quite significant. And in fact, many other sectors like auto would also have participated much more, because they are very strong beneficiaries of the easing equity and rate cut cycle, but for the rare magnets issue. Otherwise, the autos would have done much better than what they did on Friday. And if that sector remains subdued due to concerns around these supplies and apparent shutdowns, etc, so at that time you could get opportunities to buy these stocks. Otherwise, what RBI has delivered combined with the kind of tax breaks which the government has given for the middle class this year, higher government spending, overall lower inflation, so it is a perfect combination for revival in economic growth and as that plays out, markets should also do well. The one point that I wanted to discuss is that this big bazooka that they have given, I mean, not just the policy rate cut, but even for the MFI sector, because this is one space within financials which did have quite a fair bit of stress. Tell me, how does this help the MFI sector? And would you be an investor here at all? Sandip Sabharwal: Yes, I think most of the MFI-focused companies are trading at somewhat distressed valuations. And there were two comments, specifically, one that the RBI has clearly stated that they see easing stress on the unsecured loan book, so that is overall good for the financial sector, especially for NBFC and more specifically for MFIs, although there would be some concerns related to some state government bringing out new laws, etc, where some specific company could get impacted, so that has to be more minutely analysed. But that comment combined with the fact that MFI lenders have the ability to diversify into other segments and still retain the MFI categorisation, I think that is a significant positive, because then risk can be maintained better in the balance sheet. So, overall, it is quite positive for the MFI sector, even for the gold lenders where the norms have been eased. So, something has been given to everyone. If you can just highlight some of your top favourites within the financial space. Well, of course, it is not just the MFIs, the gold financers, it is actually great news for many of these stocks, but which are your top bets within the financial space? Sandip Sabharwal: The larger bank can continue to do well, which include ICICI, HDFC, Axis, Kotak, etc. Some of the PSU banks could see a revival. So, because of the sheer underperformance, we have actually recently added into SBI also in our portfolios. ADVERTISEMENT The other part which could benefit, obviously the NBFCs benefit much more in a significant easing cycle than the banks, so NBFCs people have a wide choice like Manappuram, L&T Finance, Mahindra Financial, Bajaj Finance, etc, among the NBFCs. But then there are others also which could benefit. So, investors have a wide choice. But overall, for the NBFC sector, this what RBI has been doing over the last few months is a much more significant positive than banks per se because most large banks have 40-45% CASA deposits where the costing does not reduce so much immediately and it is more or less fixed, although most banks have cut rates by 25 basis points, but for NBFCs which tend to be bulk borrows, significant monetary easing is much more positive. ADVERTISEMENT The realty pack, where is it that you find comfort to buy a fresh or add-in or even some of the HFCs, for instance, maybe that is a better play. Sandip Sabharwal: I like diversified NBFCs better. So, I would focus on those because only focused housing finance companies will continue to face more and more margin pressures as the liquidity eases. So, it is better to be in the diversified space. On the real estate sector, obviously this benefits the real estate sector. But as of now, I am not finding comfort in buying into any of these real estate companies at these valuations because the run-ups in most in the near term has been very substantial be it the market leader something like DLF already valued from 600 odd to 850, 880 something, so the rallies over the last one or two months in most of the real estate counter has been so significant. It is tough to find value. But on correction, we could still evaluate. ADVERTISEMENT Where both the companies will actually see what they can do best. But it is a big issue that is now emerging for the auto companies specifically with the shortage of critical rare earth magnets rather coming in from China. What is your sense that how severe this could actually impact the Indian auto industry and other sectors as well, given the fact we have a lot of reliability on China when it comes to select magnets? Sandip Sabharwal: So, there is a lot of news to go on where the impacts could be. The direct impact is more on the auto side immediately but apparently be going to a electronics, etc. So, now it will depend on how fast. So, it is not a question of supply. The supply is there, the supply is not being given, so that is the issue. So, whether it will get resolved or not, we do not know. Overnight there has been some news flow that China has approved supplies to some European and US customers. So, the point is, is India going to be singled out or is this issue going to be resolved? So, there are too many moving pieces. So, we need to watch out for that. EVs apparently will be much more impacted. So, to that extent, companies which have bigger EV portfolio or greater reliance on EVs only or two-wheeler EV companies, etc, those might be impacted more if it does not get resolved over the next four to six months. ADVERTISEMENT
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Business Standard
06-06-2025
- Business
- Business Standard
MFI stress to be steady in next few quarters: RBI Deputy Governor
Stress in the microfinance portfolio is expected to stabilise over the next couple of quarters, Swaminathan J, Deputy Governor, Reserve Bank of India (RBI), said on Friday during the post-monetary policy press meet. Meanwhile, RBI on Friday relaxed the qualifying criteria for Non-Banking Finance Companies (NBFCs) to be classified as Microfinance Institutions (MFIs). Under the revised criteria, NBFCs will have to maintain 60 per cent of their assets in the microfinance loan portfolio instead of the earlier 75 per cent. 'The entities predominantly in this segment have already identified, recalibrated their business models, and stepped up their collection methodologies. We have also seen a shrinkage of that portfolio due to this recalibration,' Swaminathan said, referring to MFIs. 'So, maybe over a period of time, over the next couple of quarters, this should stabilise,' he added, cautioning that much will depend on overall economic conditions and income levels, as MFI portfolios remain the most vulnerable segment. Data from CRIF High Mark shows that the delinquency rate (loans overdue by 90+ days) in the microfinance sector was 1.3 per cent in Q4 FY24, down from 1.8 per cent in Q3, but it remains a key concern for lenders. 'Q1 (FY26) is likely to see a peak in slippages. The various guardrails put in place by MFIN and Sa-Dhan are expected to benefit the sector in the long run. However, they will cause some short-term pain, which was necessary to clean the system. By Q2 or Q3, slippages should start to moderate. The only caveat is that MFI growth this year is expected to remain muted due to asset quality challenges coupled with slower growth,' said an official from a private bank. According to the CRIF High Mark report, the gross loan portfolio of NBFC-MFIs shrank by 18.2 per cent year-on-year to ₹1.8 trillion at the end of 31 March 2025. Experts said RBI's move to relax the qualifying criteria for NBFCs to be classified as MFIs will allow these companies to diversify into secured assets and continue growth, especially as self-regulatory organisations (SROs) tighten guardrails on the MFI portfolio. 'Reduction in the qualifying asset criteria for NBFC-MFIs shall improve their loan diversification, thereby augmenting their credit risk profile, and shall enable them to meet other credit requirements of their end borrowers,' said A M Karthik, Senior Vice President, ICRA. Ganesh Narayanan, CEO, CreditAccess Grameen, said, 'This policy shift will enable accelerated diversification within our operations, ensuring balance sheet stability and positioning us for robust cross-cycle earnings. The RBI has time and again introduced progressive measures that support the growth of the microfinance sector, creating a more inclusive ecosystem.'
