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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