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Business Standard
10 hours ago
- 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
3 days ago
- 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 .
The Hindu
3 days ago
- Business
- The Hindu
RBI reduces qualifying asset threshold for NBFC-MFIs
The Reserve Bank of India (RBI) on Friday reduced the qualifying asset threshold for non-banking financial companies – microfinance institutions (NBFC-MFIs) to 60% from 75%, in a boost to the industry. Qualifying assets of NBFC-MFIs shall constitute a minimum of 60% of the total assets (netted off by intangible assets), on an ongoing basis. If an NBFC-MFI fails to maintain the qualifying assets as per the threshold for four consecutive quarters, it shall approach the Reserve Bank with a remediation plan for taking a view in the matter, the RBI said in a notification. This will now help the microfinance sector to diversify and expand its assets and improve the financial position of the MFIs, JiJi Mammen, executive director and CEO of Sa-Dhan, a self-regulatory organisation for the microfinance industry, said. 'I am sure this will help the sector strengthen and provide better services to poor households. It is really great to see this decision on a day when the monetary policy committee has announced a significant reduction in repo rate and lowering of cash reserve ratio. These steps will help in improving fund availability to the MFIs,' he said. '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, CEO, CreditAccess Grameen Ltd. It is a welcome step that will help NBFC-MFIs to comply with the requirement and give some scope for diversification. This decision empowers NBFC-MFIs with greater operational flexibility, enabling them to diversify their portfolio, serve a broader borrower base and structure loans with more adaptive terms, said Jugal Kataria, group controller, Satin Creditcare Network Ltd. 'By easing the norms and allowing flexibility for a temporary dip below the threshold for up to three consecutive quarters, the RBI has not only acknowledged ground realities but also ensured that NBFC-MFIs can maintain healthy liquidity, ' he said.
Business Standard
20-05-2025
- Business
- Business Standard
Satin Creditcare Posts a Healthy Profit After Tax (Pat) Of Rs217 Crore for Q4 Of FY25
VMPL Mumbai (Maharashtra) [India], May 20: Satin Creditcare Network Ltd. (SCNL), a leading NBFC-MFI committed to rural financial inclusion, has reported a strong financial performance for Q4 of FY 2025. Despite ongoing challenges in the microfinance sector, the company's resilience and strategic prudence have enabled it to maintain stability and growth. On a standalone basis, SCNL recorded an Assets Under Management (AUM) of Rs11,316 crore, reflecting a 6.8% year-on-year growth. The company continued its streak of profitability for the 15th consecutive quarter, posting a Profit After Tax (PAT) of Rs217 crore and a Pre-Provision Operating Profit (PPOP) of Rs736 crore. Return metrics remained robust, with Return on Assets (RoA) at 2.07% and Return on Equity (RoE) at 7.86%, backed by a healthy net worth of Rs2,843 crore. Despite prevailing headwinds, SCNL demonstrated significant improvement in asset quality. The company successfully lowered its PAR 1 by 192 basis points to 4.9% and maintained Gross Non-Performing Assets (GNPA) at 3.70%. Collection efficiency for the 0 days past due portfolio remained exceptional, standing at ~99.8% in March 2025, while credit costs were effectively managed at 4.6%, staying within the guided range. On a consolidated basis, SCNL reported an AUM of Rs12,784 crore and a PAT of Rs186 crore, with a Net Interest Margin (NIM) of 12.61%, underscoring its disciplined pricing and efficient capital deployment. Mr. H P Singh, CMDexpressed happiness at the company's performance, "Our FY25 results underscore the strength of our business model and our unwavering commitment to financial inclusion. Despite challenges in the sector, our prudent risk management, diversified funding base, and customer-centric approach have enabled us to navigate volatility while maintaining stability and growth. As we move forward, we remain focused on innovation, sustainability, and expanding financial access to underserved communities." SCNL made significant strides in strategic initiatives during the year, including the successful closure of a USD 100 million syndicated social loan via External Commercial Borrowing (ECB) and further diversification of its lender base. Additionally, the company received a prestigious "SQS2" Sustainability Quality Score from Moody's Ratings for its Social Financing Framework. The company's subsidiaries also posted strong growth. Satin Housing Finance Ltd. achieved a 22% YoY AUM increase to Rs920 crore, while Satin Finserv Ltd. scaled its MSME book to Rs516 crore, marking an impressive 58% jump. With a steadfast commitment to governance, technology-driven operations, and a diversified product portfolio, Satin Creditcare continues to solidify its position as one of India's most stable and future-ready financial inclusion leaders. About Satin Creditcare Network Limited: Satin Creditcare Network Limited (SCNL or Satin) is aleading microfinance institution (MFI) in the country with presence in 29 states & union territories and over 90,000 villages. The Company's mission is to be a leading micro financial institution by providing a comprehensive range of products and services for the financially under-served community. The Company aims to lead in gender empowerment by leveraging on technology and innovation that forge sustainable strategic partnerships. The Company also offers a bouquet of financial products in the Non-MFI segment, comprising of loans to MSMEs and affordable housing loans. In April 2017, SCNL incorporated a wholly-owned housing finance subsidiary Satin Housing Finance Limited (SHFL) for providing loans in the affordable and micro-housing segment. In January 2019, SCNL received separate NBFC license to commence MSME business through Satin Finserv Limited (SFL). In August 2024, SCNL incorporated a subsidiary for software services, Satin Technologies Limited (STL) dedicated to developing innovative, world-class technology solutions by leveraging cutting-edge technologies. As on 31st March 2025, Satin group had 1,568 branches and a headcount of 16,705 across 29 states and union territories, serving 33.6 lakh clients.
Time of India
30-04-2025
- Business
- Time of India
Microfin in Major Crisis with Near-2x NPA Surge
India's microfinance crisis has deepened with delinquency rates almost doubling. The gross non-performing asset (NPA) ratio for the sector jumped to 16% at the end of FY25 from 8.8% in the year before, with the joint liability-based lending model appearing to be crumbling. Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads India's microfinance crisis has deepened with delinquency rates almost doubling. The gross non-performing asset (NPA) ratio for the sector jumped to 16% at the end of FY25 from 8.8% in the year before, with the joint liability-based lending model appearing to be absolute terms, NPAs spiralled to ₹61,000 crore at March-end from ₹38,000 crore a year ago, said people aware of the matter, citing data compiled by a credit this period, the sector's cumulative gross loan portfolio contracted about 7% as lenders shrank books in response to rising loan the cross-section of profit-seeking microfinance lenders, the sticky loan ratio was the highest for the small finance bank segment with 22% of its cumulative ₹59,817 crore microfinance loans turning bad at the end of the last fiscal year. For universal banks, the ratio was 17.5% of their ₹1.24 lakh crore of microfinance exposure.'The recovery is still at a distance. We may see certain green shoots only by the end of FY26. The asset quality stress may prolong for another two-three quarters,' said Shweta Daptardar, vice president, diversified financials, Elara bad loan ratio for the non-banking finance company-microfinance institutions (NBFC-MFI) group was 12.3% and that of other NBFCs was 12.8%.With Tamil Nadu planning to regulate microfinance operations in the state, the delinquency rate may rise as seen in the case of Karnataka when it enacted a similar law in late February, people tracking the sector said. 'The Tamil Nadu Ordinance will exacerbate the challenge further. The Karnataka market took about two months to settle down after the enactment of the microfinance regulation law. Like in Karnataka, the Tamil Nadu bill is also targeted at unregulated entities but it would destabilise the market for some time,' Daptardar said. The sectoral stress has wiped out investors' wealth significantly with lenders like Fusion Finance and Spandana Sphoorty Financial witnessing about a 66-68% decline in share prices over the past 12 Grameen, the country's largest NBFC-MFI, saw its market value drop 23%. Among high street lenders, IDFC Bank saw its price fall 18% largely on account of the stress in its unsecured portfolio. Microfinance institutions give collateral-free loans to low-income households with annual incomes of less than ₹3 lakh. Women are the primary beneficiaries of such loans. The lenders used to form joint liability groups (JLG) of women that used to act as an intangible collateral for such otherwise unsecured lending.
