Latest news with #NBFC-MFIs
Time of India
2 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 .
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Business Standard
2 days ago
- 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.'
The Hindu
2 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.
Time of India
5 days ago
- Business
- Time of India
Signs of revival: Five listed NBFC-MFIs take Rs 2,440 cr bad loans off balance sheets in Jan-March
Kolkata: Microfinance lenders accelerated the cleansing of their balance sheets in January-March, taking a further hit on profitability as the burden of stressed loans refused to ease, with the once-reputed credit culture of bottom-of-the-pyramid borrowers waning. The write-off was part of a strategy to bite the bullet and be future-ready as the industry expects a turnaround in a quarter or two. The five publicly listed non-banking finance companies-microfinance institutions (NBFC-MFIs)—CreditAccess. Grameen, Fusion Finance , Muthoot Microfin , Satin Creditcare Network and Spandana Sphoorty —cumulatively wrote off bad loans worth Rs 2,440 crore in the fourth quarter of FY25, compared with less than Rs 300 crore in the year-ago period. The idea is to begin the fiscal year by shedding the stickiest and ageing non-performing assets from the balance sheet . Writing off loans needs full provisioning against those accounts. Accelerated write-offs require lenders to raise the provisioning level and take a larger hit on the profit and loss account. 'While challenges remain, the early signals are encouraging, showing a clear reversal,' said HP Singh, chairman of Satin, on a post-earnings analyst call. He noted that at times, only disruption can shake companies out of complacency and force a transformation. 'This perfectly captures the spirit of FY25 — a year many in India's microfinance sector might remember as a testing period, others as a wake-up call.' Satin was the sole listed NBFC-MFI that was profitable in all four quarters of FY25. Udaya Kumar Hebbar, managing director of CreditAccess Grameen , said on an analyst call, 'The rising delinquency trend in the microfinance industry, which began in April 2024, peaked in November 2024, subsequently reversing till March 2025. We are already witnessing a new PAR ( portfolio at risk) accretion rate largely getting normalised across all states, excluding Karnataka.' CreditAccess is the country's largest NBFC-MFI. Live Events HEAVY LOAD Gross non-performing assets (NPAs) before the technical write-off hit a record Rs 61,000 crore at the end of March, up from Rs 38,000 crore a year prior to that, as borrowers defaulted due to over-indebtedness. The sector's cumulative gross loan portfolio contracted by about 7% to Rs 3.81 lakh crore at the end of the March quarter, from the year earlier, as lenders slowed disbursement to prevent further loan losses. Lenders write off loans when there is no realistic prospect of recovery. Accelerated write-offs contribute to elevated credit costs, impacting the profit and loss account. Recoveries against such written-off loans, if any, will get credited to the profit and loss statement. The move was forced by growing customer overleveraging, crumbling of the joint liability model, rising staff attrition and disruptions in Karnataka and Tamil Nadu. For instance, Fusion wrote off Rs 917 crore during the fourth quarter alone, nearly 40% of the cumulative write-offs by listed NBFC-MFIs. To put this into perspective, it had written off Rs 970 crore (net of recoveries) in the past 14 years before FY25. Satin had never written off loans before FY25 despite repayment disruptions during events such as demonetisation and the pandemic. Spandana, which is now under regulatory scrutiny for alleged misreporting and suppression of fraud, wrote off Rs 1,555 crore over the four quarters of FY25. 'The MFI industry stood at a critical juncture, facing formidable challenges,' said Singh of Satin. 'Institutions had to navigate a shifting landscape, clients experienced heightened vulnerability and the sector as a whole was compelled to rethink long-held assumptions.' It forced the sector to pause, reflect and reset, he said. 'These disruptions served as a catalyst, driving deep introspection, operational recalibration and a renewed focus on fundamentals,' Singh said.
Indian Express
26-05-2025
- Business
- Indian Express
Microfinance loan delinquencies jump 163% to Rs 43,000 crore in FY2025
The microfinance sector in India is experiencing a significant surge in delinquencies, with portfolio at risk (PAR), or loans overdue for over 31 days, jumping by 163 per cent to Rs 43,075 crore in the fiscal year ended March 2025, up from Rs 16,379 crore in the previous year. This rise in delinquencies reflects the growing stress in the small borrower segment. Significantly, the microfinance industry's gross loan portfolio (GLP) fell to Rs 381,200 crore as of March 2025, marking a 13.9 per cent fall from Rs 442,700 crore a year ago. Data from CRIF High Mark, a credit information bureau, shows that PAR in the 31-180 days overdue bucket has gone up to 6.2 per cent during FY2025 as against 2.1 per cent in the same period of last year. PAR in the 180 days plus bucket has jumped from 1.6 per cent to 5.1 per cent during the fiscal. 'PAR of 91-180 days and 180 plus days (including write-offs) continue to rise, particularly among banks and small finance banks, followed by NBFC-MFIs, highlighting persistent challenges,' the agency said. According to CRIF High Mark, higher-ticket loans above Rs one lakh have experienced an uptick in all delinquency buckets as their share in POS expands, highlighting the need for greater caution. However, its delinquency is much lower than the lower-ticket sizes, it said. Rating firm CRISIL said lending to over-leveraged borrowers was the primary factor that resulted in higher delinquencies for microfinance institutions in the last fiscal. Resultantly, the reported delinquencies in 90 plus DPD (days past due) bucket are estimated to have more than doubled to 6.0 per cent as on March 31, 2025, from 2.4 per cent as on March 31, 2024. Increased borrowing from multiple sources has led to excessive debt burdens among borrowers. Further, external economic shocks and income uncertainties have impacted repayment capacities, financial sector officials said. The decline in microfinance gross loan portfolio reflects a deliberate and calibrated shift by lenders to manage emerging stress, especially in light of regulatory developments and evolving collection practices. Despite a seasonal rebound with disbursements rising 12.2 per cent Q-o-Q to Rs 71,500 crore, the year-on-year (Y-o-Y) figures remain subdued with a 38.0 per cent decline, signifying an industry-wide emphasis on quality focused originations, according to CRIF High Mark, a credit information bureau in India. The gross loan portfolio declined by 2.6 per cent on a quarter-on-quarter basis. State-level data revealed notable contractions in Tamil Nadu and Karnataka portfolios, influenced by anticipated ordinances and increased regulatory intervention on collection practices. However, West Bengal emerged as a bright spot with a 1.5 per cent Q-o-Q rise in portfolio size, CRIF High Mark said. Overall, the industry-wide trend indicates consolidation, with a visible moderation in borrowers maintaining multiple credit relationships, it said. The number of active microfinance loans declined from 16.1 crore in March 2024 to 14.0 crore in March 2025. Borrowers with 5 or more lender associations now constitute only 4.9 per cent of the total book, down from 9.7 per cent a year ago, it said. 'A key trend highlighted in the report is the growing shift toward higher-ticket loans. Portfolio for loans above Rs 1 lakh grew by 38.5 per cent Y-o-Y, whereas those in the less than Rs 30,000 segment were at -8.0 per cent Q-o-Q and -35.9 per cent Y-o-Y, underlining a shift away from smaller-ticket lending typically associated with this segment,' CRIF High Mark said. Amid these shifts, the sector remains on a path of long-term sustainability. While current indicators suggest cautious lending and persistent stress in parts of the portfolio, improvement in early-stage performance and a gradual move towards higher-quality credit segments are encouraging trends, CRIF High Mark said. Ramkumar Gunasekaran, Director and Head of Sales at CRIF High Mark, said: 'Lenders are making conscious choices that favour resilience, stability and long-term impact. The 12.2 per cent Q-o-Q rise in disbursements to Rs 71,580 crore this quarter, despite broader moderation, reflects continued demand and a disciplined credit approach.' 'As institutions recalibrate and regulatory frameworks evolve, we are confident that the sector is laying the groundwork for stronger and more inclusive growth. With continued focus and collaboration, we remain hopeful that the coming quarters will bring renewed momentum,' he said. It said NBFC-MFIs experienced a relatively smaller decline in GLP this quarter, down 1.8 per cent QoQ, supported in part by increased originations during the JFM period. However, on a YoY basis, the contraction has been more pronounced, with GLP dropping by 18.2 per cent, accompanied by a moderate reduction in overall market share. Among other lender types, SFBs are also witnessing a significant contraction, declining by 5.4 per cent Q-o-Q and 19.9 per cent Y-o-Y.
