Latest news with #NBFC-MFIs
Economic Times
11-06-2025
- Business
- Economic Times
Microfinance sector sees equity, borrowing and loan book shrink in FY25
Microfinance companies faced sharp declines in equity, borrowing, and loan portfolios in FY25, reflecting stress and cautious lending in the NBFC-MFI segment. NBFC-MFIs saw their equity shrink 1.8% and debt funding drop 36% in FY25 amid tightened lending by banks and investors. Loan portfolios also contracted nearly 14% as lenders slowed disbursements due to asset quality concerns. Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads The equity capital of pure-bred microfinance companies shrank 1.8% in 2024-25 while their outstanding annual borrowing saw a 36% drop as investors and banks tightened purse strings amid the stress in the microfinance companies are classified as non-banking finance company-microfinance institutions (NBFC-MFI).Total equity decreased 1.8% to Rs 35,759 crore at the end of March, the Microfinance Institutions Network (MFIN) said in its March quarter report. During 2024-25, NBFC-MFIs received a total of Rs 57,307 crore in debt funding, a 35.7% decrease from the previous financial is one of the two self-regulators for the to the data, banks contributed 78.4% of NBFC-MFIs' total annual borrowing in 2024-25. Other NBFCs contributed 11.9%, followed by external commercial borrowing (5.1%) and other sources (4.6%).The size of the gross microfinance loan portfolio contracted about 13.9% year-on-year to Rs 3.81 lakh crore at the end of 2024-25, according to CRIF High Mark data . The cumulative gross loan size for MFIN members declined 13.5% to Rs 3.75 lakh crore, as lenders slowed disbursement amid severe asset quality stress Among the regulated entities active in the microfinance segment, portfolio size of all entity types fell except for NBFCs, which saw a 4.1% year-on-year increase, said the MFIN report In terms of geographical coverage, east, northeast and south comprised 62.7% of the total microfinance portfolio. Portfolio quality as measured by PAR 31-180 – which indicates the percentage of a loan portfolio considered at risk of default within 31 to 180 days of delinquency – was 6.3% against 2.2% at the end of FY25.
Time of India
09-06-2025
- Business
- Time of India
Non-bank lender stocks surge after RBI policy announcement and relaxed norms boost sector outlook
This is a representative image MUMBAI: Shares of non-bank lenders surged on Monday following the RBI 's policy announcement on June 6, with many NBFC and small finance bank stocks posting sharp gains. The central bank's decision to reduce risk weights on retail loans for well-capitalised NBFCs and its dovish signals on liquidity lifted sentiment across the sector. Capri Global jumped 15.2%, Five Star rose 9.2%, and Edelweiss climbed 8%. IIFL gained 7.5%, Bandhan Bank added 7.1%, and Geojit Financial advanced 6.9%. JM Financial, Arman Financial, and Fedfina were up 6.7%, 6.5%, and 5.9%, respectively. Among small finance banks, ESAF gained 5.8%, Utkarsh 4.6%, and Jana Small Finance 5.7%. RBL Bank added 5.3%, Fusion rose 5.2%, and IREDA was up 5.2%. Wealth and asset managers such as UTI AMC and SMC Global rose 4.3% and 4.4%, respectively, while MCX gained 6.8%. The RBI also relaxed norms for microfinance lenders and small finance banks, further boosting the outlook for the broader sector. For NBFC-MFIs, the qualifying asset criteria were eased, allowing them to diversify up to 40% of their portfolio beyond microloans. This is expected to reduce concentration risk, improve balance sheet resilience, and enhance earnings stability. For small finance banks, lower risk weights on microfinance loans will reduce capital requirements and expand lending capacity. These moves, combined with a supportive macro environment, are expected to aid credit growth and financial inclusion across underserved segments. 'For NBFCs that operate extensively in tier 2 and tier 3 towns, this policy move opens up new momentum for credit-led expansion. The broader implication of this rate cut cycle is significant as it reflects a forward-looking strategy that is aligned with India's vision for inclusive and sustained growth. As highlighted by the RBI Governor, this brings the country a step closer to the goal of Viksit Bharat 2047. With rural resilience and continued expansion in services, both urban and rural consumption are poised to become strong drivers of India's next growth phase,' said Umesh Revankar, Executive Vice Chairman, Shriram Finance. Emkay Global said in a research note, 'The RBI heard the practical challenges of the new gold loan rules and adjusted them accordingly. We see this as a sign of the regulator wanting to remove friction in banks' and NBFCs' ability to lend, as far as possible.' According to Vivek Singh , CEO, Home Credit India, 'The recognition of abating stress in unsecured personal loans and ongoing recalibration efforts reinforces our commitment to robust underwriting and collection practices, supporting a healthier credit environment and India's growth.' George Alexander Muthoot, MD, Muthoot Finance, said, 'For NBFCs, this is an encouraging move as it creates a favourable environment by lowering borrowing costs and extending affordable credit to underserved communities. The move, coupled with a lowered inflation outlook, is likely to support domestic consumption and stimulate credit demand in the coming quarters. Overall, we view this as a timely and positive intervention that can support a stronger credit cycle in FY26. ' Stay informed with the latest business news, updates on bank holidays and public holidays . AI Masterclass for Students. Upskill Young Ones Today!– Join Now
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Business Standard
09-06-2025
- Business
- Business Standard
RBI's revised QA norms to boost compliance, broaden microfinance reach
The Reserve Bank of India 's (RBI's) revised qualifying asset (QA) criteria will enhance compliance while empowering institutions to build a more balanced portfolio, the Microfinance Institutions Network (MFIN) said on Monday. On Friday, the regulator relaxed the qualifying asset requirement for non-banking financial company-microfinance institutions (NBFC-MFIs) to 60 per cent of total assets, down from 75 per cent earlier. This means MFIs must now maintain 60 per cent of their assets in microfinance loans, instead of the earlier 75 per cent. The decision will enable NBFC-MFIs to extend their reach to the 'missing middle' — through products designed for clients transitioning to micro, small and medium enterprises (MSMEs), micro-housing, and related sectors, MFIN said. It added that the move would strengthen the sector's long-term sustainability while keeping the core microfinance mission intact. In a press release, MFIN said: 'The revised 60 per cent qualifying asset requirement is expected to enhance compliance across NBFC-MFIs by addressing the systemic reasons behind earlier breaches, and empower institutions to build a more balanced portfolio.' Over the past three years, MFIN has actively engaged with the RBI, advocating for a more realistic and balanced QA threshold that aligns with the policy objective of keeping NBFC-MFIs focused on microfinance, while also reducing the incidence of regulatory breaches. 'This regulatory change demonstrates the responsiveness of the RBI to the genuine demands of the industry,' said Alok Misra, CEO and Director of MFIN. 'It will help NBFC-MFIs remain in regulatory compliance at all times, diversify to some extent, and yet retain focus on microfinance.' This significant policy update is expected to ease compliance challenges and allow NBFC-MFIs to better serve microfinance clients while managing portfolio risks. The QA norm was originally introduced in 2011 when the RBI created the NBFC-MFI category, setting the threshold at 'not less than 85 per cent of its net assets,' with 'net assets' defined as total assets excluding cash, bank balances, and money market instruments. In March 2022, the RBI revised this to 75 per cent of total assets to offer flexibility and promote innovation in meeting evolving credit needs. However, the change inadvertently tightened the framework, leading to frequent breaches of the norm.
Time of India
06-06-2025
- Business
- Time of India
RBI lowers qualifying asset criteria for NBFC-MFIs to 60% from 75%
The Reserve Bank of India ( RBI ) Friday lowered the minimum amount of eligible microfinance loans specialized lenders must hold on their books, allowing microfinance-NBFCs to further diversify their asset base. In a notification Friday, the central bank said qualifying assets (those meeting the definition of microfinance loans) of NBFC-MFIs must constitute a minimum of 60% of the total assets (netted off by intangible assets), on an ongoing basis. The earlier threshold was 75%. 'If an NBFC-MFI fails to maintain the qualifying assets as aforesaid for four consecutive quarters, it shall approach the Reserve Bank with a remediation plan for taking a view in the matter,' the RBI said. The central bank also said that 'qualifying assets' of NBFC-MFIs has been aligned with the definition of 'microfinance loans'. As per RBI rules, microfinance loan is defined as a collateral-free loan given to a household having annual household income up to Rs 3,00,000. 'This policy shift will enable accelerated diversification within our operations, ensuring balance sheet stability and positioning us for robust cross-cycle earnings,' said Ganesh Narayanan, Chief Executive Officer, CreditAccess Grameen Ltd . Reduction in the qualifying asset criteria for NBFC-MFIs is expected to improve loan diversification of lenders, thereby augmenting their credit risk profile . It will also enable them to meet other credit requirements of their end borrowers, according to A M Karthik, Senior Vice President & Co-Group Head, Financial Sector Ratings, ICRA .
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Business Standard
06-06-2025
- Business
- Business Standard
MFI stress to remain steady in coming quarters: RBI's DG Swaminathan
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. '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.'
