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Economic Times
21 hours ago
- Business
- Economic Times
Three-lenders cap makes micro borrowers fall in line
Synopsis Borrowing by vulnerable economic groups is changing. The number of borrowers with many lenders decreased significantly. This reflects stricter lending practices. Data shows a drop in borrowers using more than three lenders. However, some older loans still pose a risk. The microfinance sector is now focusing on stability. The market size has contracted. Getty Images The number of bottom-of-the-pyramid borrowers taking loans from four or more lenders has come down 44% from a year ago, reflecting the impact of prudential lending in the most vulnerable economic strata where mounting delinquencies dented the performance of Indian lenders in the last five number of such borrowers queuing up at more than three financiers fell to 3.1 million at the end of the June from 5.7 million a year ago, showed the CRIF High Mark data, illustrating the efficacy of a three-lender exposure cap that took effect from the start of this fiscal. The latest count represents about 4% of an active borrower base of 79.8 3.1 million customers, who could be considered 'higher risk' have ₹35,712 crore of outstanding borrowing between them at the end of June. That amounts to about a tenth of the sector's outstanding loan portfolio of ₹3.6 lakh portfolio relating to borrowers transacting with more than three microfinance lenders remains very vulnerable to slippages, especially after the guardrail 2.0 regime limiting fresh loans from more lenders to such borrowers, Crisil Ratings' director Malvika Bhotika said a fortnight ago. "As per our estimates, almost a fourth of the portfolio with more than three lenders is in the PAR (portfolio at risk) 31-180 days bucket as on June 30, 2025," she said. The portfolio exposure of borrowers with high lender associations declined from 19.2% of the book over the past 12 months, CRIF data this transition has lowered the exposure of MFIs to over-leveraged borrowers, slippages from the legacy portfolio will keep asset quality under pressure, experts said. The issue of borrower overleveraging has been at the heart of the high delinquencies over the past one years leading to severe asset quality stress and loss in income for lenders. It's ironic that lending to the micro borrower segment, which was once known for their robust repayment behaviour, is now being considered risky. "The industry is prioritising risk management and portfolio stabilisation over aggressive growth, reflected in subdued lending activity and a stronger focus on liquidity," CRIF said. This moderation aligns with the implementation of guardrails by self-regulatory organisation Microfinance Institutions Network to mitigate overleveraging risks. This led to a 17% year-on-year contraction in the size of the microfinance market to ₹3.59 lakh active loan accounts fell to 132 million from 159.3 million, with the live customer base declining to 80 million from 86.6 million between June 2024 and June 2025, data compiled by CRIF sector's portfolio at risk for more than 90 days past due remained elevated at 15.54% of the total on- and off-balance sheet book. This means the gross non-performing assets without excluding the technically written-off loans stood at ₹55,820 crore at the end of June. Loans are classified as NPA when borrowers fail to pay interest or principal for more than 90 days.
Time of India
a day ago
- Business
- Time of India
Three-lenders cap makes micro borrowers fall in line
The number of bottom-of-the-pyramid borrowers taking loans from four or more lenders has come down 44% from a year ago, reflecting the impact of prudential lending in the most vulnerable economic strata where mounting delinquencies dented the performance of Indian lenders in the last five quarters. The number of such borrowers queuing up at more than three financiers fell to 3.1 million at the end of the June from 5.7 million a year ago, showed the CRIF High Mark data, illustrating the efficacy of a three-lender exposure cap that took effect from the start of this fiscal. The latest count represents about 4% of an active borrower base of 79.8 million. The 3.1 million customers, who could be considered 'higher risk' have ₹35,712 crore of outstanding borrowing between them at the end of June. That amounts to about a tenth of the sector's outstanding loan portfolio of ₹3.6 lakh crore. The portfolio relating to borrowers transacting with more than three microfinance lenders remains very vulnerable to slippages, especially after the guardrail 2.0 regime limiting fresh loans from more lenders to such borrowers, Crisil Ratings' director Malvika Bhotika said a fortnight ago. "As per our estimates, almost a fourth of the portfolio with more than three lenders is in the PAR (portfolio at risk) 31-180 days bucket as on June 30, 2025," she said. The portfolio exposure of borrowers with high lender associations declined from 19.2% of the book over the past 12 months, CRIF data showed. While this transition has lowered the exposure of MFIs to over-leveraged borrowers, slippages from the legacy portfolio will keep asset quality under pressure, experts said. The issue of borrower overleveraging has been at the heart of the high delinquencies over the past one years leading to severe asset quality stress and loss in income for lenders. It's ironic that lending to the micro borrower segment, which was once known for their robust repayment behaviour, is now being considered risky. "The industry is prioritising risk management and portfolio stabilisation over aggressive growth, reflected in subdued lending activity and a stronger focus on liquidity," CRIF said. This moderation aligns with the implementation of guardrails by self-regulatory organisation Microfinance Institutions Network to mitigate overleveraging risks. This led to a 17% year-on-year contraction in the size of the microfinance market to ₹3.59 lakh crore. The active loan accounts fell to 132 million from 159.3 million, with the live customer base declining to 80 million from 86.6 million between June 2024 and June 2025, data compiled by CRIF showed. The sector's portfolio at risk for more than 90 days past due remained elevated at 15.54% of the total on- and off-balance sheet book. This means the gross non-performing assets without excluding the technically written-off loans stood at ₹55,820 crore at the end of June. Loans are classified as NPA when borrowers fail to pay interest or principal for more than 90 days.
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Business Standard
6 days ago
- Business
- Business Standard
RBI's revised co-lending norms likely to boost NBFC growth: Crisil
The revised co-lending guidelines issued by the Reserve Bank of India (RBI) are expected to create growth opportunities for non-banking financial companies (NBFCs) while expanding regulatory oversight of the segment, rating agency Crisil said in a note. The new directions extend the co-lending framework to all regulated entities (REs) and across all types of loans—secured and unsecured. 'The revised directions will increase growth opportunities for NBFCs over the long term because their applicability extends to such arrangements between all REs and all forms of loans, whether secured or unsecured,' said Malvika Bhotika, Director, Crisil Ratings. 'Further, the directions require each RE to retain a minimum 10 per cent share of the loans in their books, compared with a minimum 20 per cent exposure requirement for NBFCs currently. This should particularly benefit mid- and small-sized NBFCs that face higher funding constraints,' she added. According to Crisil, co-lending assets under management (AUM) of NBFCs have seen strong traction in recent years and are estimated to have crossed ₹1.1 trillion as of March 31, 2025. A key change in the revised guidelines is the permission for originating REs to provide Direct Lending Guarantees (DLGs) of up to 5 per cent of loans across all types of lending. Previously, this was limited to digital lending. The move is expected to enhance risk-sharing and reward alignment among co-lending partners. Uniform asset classification, borrower profiling Another positive development is the requirement that all partners in a co-lending arrangement follow consistent asset classification for a given loan exposure. This aims to ensure uniform risk assessment and greater transparency in borrower profiling. The revised norms will come into effect from January 1, 2026, or earlier if an RE chooses to adopt them in accordance with its internal policy.
India.com
6 days ago
- Business
- India.com
RBI's Revised Co-lending Guidelines Will Boost Transparency: Report
New Delhi: Reserve Bank of India's (RBI) revised directions on co-lending will boost the transparency in the lending space by strengthening disclosure requirements and expanding regulatory oversight beyond banks and NBFCs, a report said on Wednesday. All forms of loans will fall under the regulatory oversight compared with only priority sector loans currently, Crisil Ratings said in the report. The directions also require each RE (regulated entity) to retain a minimum 10 per cent share of the loans in their books, compared with a minimum 20 per cent exposure requirement for NBFCs currently, which should particularly benefit mid- and smaller-sized NBFCs that face higher funding constraints. "Co-lending is seen as a win-win for NBFCs and banks alike, as it allows sharing of risk and rewards from loans they jointly extend to borrowers. For NBFCs, it enables access to bank funding and diversification in resource mobilisation avenues. For banks, on the other hand, it provides optimal access to harder-to-reach customers and geographies," the report said. Notably, the co-lending assets under management of NBFCs have seen healthy traction over the past few years and are estimated to have crossed Rs 1.1 lakh crore as of March 31, 2025. "The revised directions will increase growth opportunities for NBFCs over the long term because their applicability extends to such arrangements between all regulated entities (REs) and all forms of loans, whether secured or unsecured," said Malvika Bhotika, Director, Crisil Ratings. "Moreover, enhanced disclosure requirements on a quarterly or annual basis, such as a list of co-lending partners, weighted average rate of interest, fees charged or paid, details of default loss guarantee (DLG), should improve transparency and benefit all stakeholders.' The provision of allowing originating REs to provide DLG up to 5 per cent of loans to all forms of lending, as against only for digital lending, will broaden the sharing of risk and rewards among co-lending partners. The directions are applicable from January 1, 2026, or from any earlier date as decided by an RE as per its internal policy.
Time of India
10-07-2025
- Business
- Time of India
Education loan book growth to halve amid US visa curbs
Mumbai: Crisil has forecast that growth in the education loan book of non-banking finance companies (NBFCs) will slow to half of last year's pace due to tightening immigration policies in the United States that are discouraging Indian students from pursuing higher education abroad. 'Policy uncertainties in the US, combined with measures including reduced visa appointments and the proposed elimination of Optional Practical Training norms have culled newer loan originations. This has led to around 30% decline in total disbursements to that geography last fiscal,' said Malvika Bhotika, Director at Crisil Ratings. According to the ratings agency, education loans had been the fastest-growing asset class for NBFCs in recent years, with assets under management (AUM) rising by over 50% annually. However, Crisil expects this growth to moderate to around 25% in the current fiscal, down from 48% last year and 77% the year before. The AUM is projected to reach ₹80,000 crore by March 2026, up from ₹64,000 crore in FY25. The slowdown has been attributed to a sharp decline in loan disbursements to the US — traditionally the largest destination for Indian students — as the country reduces visa appointments and considers scrapping the Optional Practical Training (OPT) programme for international students. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like 5-year-old girl needs her second heart surgery! Donate For Health Donate Now Undo Disbursements to Canada, the second-largest market, also declined due to stricter student visa rules, including higher financial requirements and a cap on permits. As a result, overall education loan disbursements rose just 8% in FY25, a sharp fall from the 50% growth seen in FY24. To counter the US-led slowdown, NBFCs are now diversifying into alternative geographies such as the UK, Germany, Ireland and other smaller nations. Disbursements to these destinations have doubled, with their combined share in total education loan disbursals rising from 25% in FY24 to nearly 50% in FY25. However, this diversification is unlikely to fully offset the drop in US-bound disbursals. The US still accounted for 50% of total education loan portfolios as of March 2025, down from 53% a year earlier, and this share is expected to decline further in the coming years. NBFCs are also exploring new product adjacencies including domestic student loans, school funding, and loans for skill development and coaching. While these segments involve lower ticket sizes and are unlikely to materially impact AUM, they may offer portfolio stability during global disruptions. Asset quality in the sector remains strong for now, with gross non-performing assets (NPAs) at 0.1% as of March 31, 2025. Even after adjusting for the principal moratorium — which covers around 85% of the loan book — gross NPAs stood at ~0.7%. 'Despite the global developments, NBFCs have maintained healthy asset quality so far,' said Sonica Gupta, Associate Director at Crisil Ratings. 'However, high growth in the past few years and estimated ~15% of the portfolio coming out of contractual moratorium this fiscal pose some asset quality risks.' The report emphasizes that NBFCs' ability to scale newer segments while maintaining quality, and to adapt to changing student preferences and international policies, will be critical for sustaining growth in the education loan segment. The analysis is based on NBFCs rated by Crisil, which represent over 90% of the industry's total AUM. Stay informed with the latest business news, updates on bank holidays and public holidays . AI Masterclass for Students. Upskill Young Ones Today!– Join Now
