Latest news with #SwaminathanJ
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Business Standard
2 days ago
- Business
- Business Standard
MFI stress to be steady in next few quarters: RBI Deputy Governor
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. Data from CRIF High Mark shows that the delinquency rate (loans overdue by 90+ days) in the microfinance sector was 1.3 per cent in Q4 FY24, down from 1.8 per cent in Q3, but it remains a key concern for lenders. '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.'
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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.'
Reuters
10-04-2025
- Business
- Reuters
India cenbank deputy urges NBFCs to bolster risk controls, board oversight
MUMBAI, April 10 (Reuters) - Indian non-bank finance firms must step up oversight of liquidity and credit risks while strengthening board-level controls, a central bank deputy governor said, warning that weak governance could amplify vulnerabilities during market stress or liquidity shocks. "Asset-liability mismatches, nature and tenor of the funding sources, and concentration risks all need board-level oversight which should be ably supported by robust internal controls," Swaminathan J, said at a conference of NBFCs on March 28. The copy of the speech was uploaded on the central bank's website on Thursday. NBFCs should not lose sight of fairness to the customer even as they pursue scale, speed, and profits, he added. "Financial inclusion cannot be used as a pretext for financial exploitation," he added. He also urged statutory auditors to closely monitor the adequacy and effectiveness of NBFCs' internal controls. The deputy governor's comments come after IndusInd Bank ( opens new tab, the fifth largest Indian private bank, said last month it expects a 2.35% decline in its net worth as of December 2024 due to discrepancies in its derivative accounts found during an internal review. IndusInd Bank's disclosure lapses have led to questions of governance, audit oversights and risk management policies of lenders. Audit findings must lead to timely and meaningful corrective action, not remain confined to meeting minutes, Swaminathan said, urging close scrutiny of complex structures, derivatives, off-balance sheet items, related-party transactions, and provisioning policies.
