Latest news with #NBFC-MFIs
Time of India
20 hours ago
- Business
- Time of India
Gold loans turn microfinance companies' best bet amid fears about the unsecured
Kolkata: Gold loans appear to have emerged as the best bet for microfinance companies planning to increase the share of secured portfolio , although the regulator has tightened rules for lenders to the yellow metal. Companies like Arohan Financial Services and Uttrayan Financial Services are among the notable ones which have taken definite steps to explore this market segment. New gold loan norms, to be implemented from April 2026, have been made borrower-friendly, however. Loans against property (LAP) is the other preferred assets class for non-banking finance companies-microfinance institutions ( NBFC-MFI ), which are exploring opportunities outside the realm of microfinance to reduce the concentration risk taking advantage of a recent RBI directive allowing them to reduce the qualifying asset to 60% from 75% earlier. In other words, this new rule means NBFC-MFIs can have a 40% non-microfinance portfolio. Microfinance is unsecured, collateral-free loans offered to low-income households with annual income of less than ₹3 lakh. "We will explore secured assets like gold loans, micro LAP amongst others. This will help secure a better credit rating , portfolio diversity and better security and profitability," Arohan managing director Manoj Kumar Nambiar told ET. Uttrayan , on the other hand, on Wednesday unveiled its first dedicated gold loan branch near Kolkata. Arohan has prepared a concept note on foraying into the gold loan business which will be put up in the next board meeting. "The RBI guideline change on qualifying assets ratio to 60/40 is a welcome change as it helps board will discuss the proposal," said Nambiar, who is the chairman of industry body Microfinance Institutions Network. "People are primarily planning to venture into the gold loan business," said Alok Biswas, managing director at Kolkata-based Janakalyan Financial Services. Gold loans carry minimum risk as these are backed by gold ornaments. However, setting up a gold loan business needs a special eco-system for valuing the gold ornaments to be pledged and also to store them securely. CreditAccess Grameen , the country largest NBFC-MFI, has no plan to get into all these, said Udaya Kumar Hebbar, who superannuated from the company on June 25 and is now a non-executive director on the board.
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Business Standard
24-06-2025
- Business
- Business Standard
PSL norm easing provides limited room for SFBs to make gains: CareEdge
The Reserve Bank of India's move to ease priority sector lending (PSL) targets may free up around Rs 41,000 crore for Small Finance Banks (SFBs). However, these banks may have limited scope to realise short-term gains by offloading excess exposure due to the low premium for such certificates, according to CareEdge Ratings. The banking regulator has reduced the overall PSL target for SFBs from 75 per cent to 60 per cent, effective from FY26, marking a significant shift in their lending obligations. In a statement, CareEdge said the lower PSL requirement would create opportunities for SFBs to sell priority sector lending certificates (PSLCs) or offload excess exposure to other market participants. However, the immediate impact on profitability may be muted. The revised 60 per cent target is seen as more attainable. It reduces the regulatory burden, particularly during periods of rapid growth or economic stress, easing compliance pressures and lowering the risk of penalties for falling short of mandated lending. Sanjay Agarwal, senior director at CareEdge Ratings, said the revised PSL guidelines represent a strategic inflexion point for Small Finance Banks. 'By reducing the overall PSL target while maintaining operational flexibility, the RBI has created a more balanced and practical regulatory framework,' he said. The RBI's easing of PSL norms for SFBs follows two recent regulatory developments in the priority sector space. First, in March 2025, the RBI expanded the range of exposures eligible for PSL classification. Second, in June 2025, it reduced the qualifying asset threshold for non-banking finance companies working as microfinance institutions (NBFC-MFIs) from 75 per cent to 60 per cent.
Time of India
23-06-2025
- Business
- Time of India
NBFC-MFIs get to cast net wider: Lower qualifying asset threshold supportive; recovery processes, technology adoption key
It is now time the sector, an essential pillar of financial inclusion and economic development, overhauls its playbook. (AI image) By Binaifer Jehani and Abbas Master The recent move by the Reserve Bank of India (RBI) to relax the qualifying asset norm of non-banking financial companies-microfinance institutions (NBFC-MFIs) promises to address several challenges bogging down the sector. Primarily, it enables MFIs to diversify asset allocation by assigning a greater proportion of their resources to products and services that extend beyond traditional microfinance. It gives NBFC-MFIs the flexibility to adjust without the fear of any regulatory repercussions. How the revised regulation benefits NBFC-MFIs: Strengthens financial stability by improving risk mitigation: By reducing reliance on microfinance loans, NBFC-MFIs are better placed to withstand market turbulence Boosts regulatory adherence: The regulation addresses the reasons that led to non-compliance among non-banking financial companies, microfinance institutions. Further, If NBFC-MFI is unable to maintain the revised threshold for four consecutive quarters, they need to submit a remediation plan to the RBI, outlining the steps taken to rectify the situation Unlocks new growth avenues: NBFC-MFIs can boost profitability by offering specialised products to clients transitioning to small and medium-sized enterprises, micro-housing and other such new segments MFIs in India already serve more than 7 crore (70 million) unique borrowers, with the majority being women in rural areas. Though the sector plays a vital role by providing marginalised households and micro-entrepreneurs access to credit and other financial services, it faces challenges such as lack of product diversification. The RBI's move to reduce the qualifying asset (net of intangible assets) threshold from 75% to 60% provides NBFC-MFIs the flexibility to diversify operations by giving credit to more segments and to improve financial stability. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Memperdagangkan CFD Emas dengan salah satu spread terendah? IC Markets Mendaftar Undo Coming on the back of the MFIN guardrails rolled out recently, the latest directive will enable NBFC-MFIs to maintain a more balanced portfolio. It also reduces their dependence on microfinance loans — which is high, making them vulnerable to asset quality risks and funding constraints — thereby helping them derisk their portfolios and improve their financial health. Besides, it will give them more room to manoeuvre and respond to changing market conditions. What the sector should do now It is now time the sector, an essential pillar of financial inclusion and economic development, overhauls its playbook. A shift towards digital integration, better risk management and customised credit products is necessary for MFIs to improve their reach and service. Digital integration can be particularly helpful to resolve an issue that has been plaguing the sector for long: poor recovery practices. While a code of conduct establishes ethical standards that loan officers should follow to ensure transparency, accountability and integrity while dealing with customers, the use of technology can help MFIs reduce the dependence on human resources. Robust credit assessments using tech tools can also avoid over-leveraging by borrowers and prevent the use of coercive recovery methods. MFIs must integrate digital tools such as mobile applications, automated credit assessments and other verifications to streamline processes and reduce in-person interactions. By leveraging technology, MFIs can scale up operations without being constrained by workforce limitations, while also maintaining a balanced human touch — necessary to reach the marginalised populace. A balanced approach In conclusion, the relaxation of qualifying asset norms will help NBFC-MFIs promote financial inclusion in a much more effective manner and also provide stability to the microfinance sector. The revised regulation is expected to enable MFIs to diversify their operations and increase access to credit for marginalised communities. Of course, challenges such as collections, portfolio quality, recovery practices, technology adoption and risk management need to be addressed. As the sector continues to evolve, it is essential for regulators, industry players and stakeholders to work together to ensure that microfinance reaches the most vulnerable sections of society and promotes financial inclusion and economic well-being among them — an important step to drive the country's economic growth. To achieve these goal, the sector has to find a balanced way to use technology, human touch and adherence to regulatory framework. (Binaifer Jehani is Business Head, Risk Solutions – Assessments & Social Sector Consulting, Crisil Intelligence. Abbas Master is Associate Director, Risk Solutions – Assessments & Social Sector Consulting, Crisil Intelligence) Stay informed with the latest business news, updates on bank holidays and public holidays . AI Masterclass for Students. Upskill Young Ones Today!– Join Now
Economic Times
11-06-2025
- Business
- Economic Times
Microfinance sector sees equity, borrowing and loan book shrink in FY25
Microfinance companies faced sharp declines in equity, borrowing, and loan portfolios in FY25, reflecting stress and cautious lending in the NBFC-MFI segment. NBFC-MFIs saw their equity shrink 1.8% and debt funding drop 36% in FY25 amid tightened lending by banks and investors. Loan portfolios also contracted nearly 14% as lenders slowed disbursements due to asset quality concerns. Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads The equity capital of pure-bred microfinance companies shrank 1.8% in 2024-25 while their outstanding annual borrowing saw a 36% drop as investors and banks tightened purse strings amid the stress in the microfinance companies are classified as non-banking finance company-microfinance institutions (NBFC-MFI).Total equity decreased 1.8% to Rs 35,759 crore at the end of March, the Microfinance Institutions Network (MFIN) said in its March quarter report. During 2024-25, NBFC-MFIs received a total of Rs 57,307 crore in debt funding, a 35.7% decrease from the previous financial is one of the two self-regulators for the to the data, banks contributed 78.4% of NBFC-MFIs' total annual borrowing in 2024-25. Other NBFCs contributed 11.9%, followed by external commercial borrowing (5.1%) and other sources (4.6%).The size of the gross microfinance loan portfolio contracted about 13.9% year-on-year to Rs 3.81 lakh crore at the end of 2024-25, according to CRIF High Mark data . The cumulative gross loan size for MFIN members declined 13.5% to Rs 3.75 lakh crore, as lenders slowed disbursement amid severe asset quality stress Among the regulated entities active in the microfinance segment, portfolio size of all entity types fell except for NBFCs, which saw a 4.1% year-on-year increase, said the MFIN report In terms of geographical coverage, east, northeast and south comprised 62.7% of the total microfinance portfolio. Portfolio quality as measured by PAR 31-180 – which indicates the percentage of a loan portfolio considered at risk of default within 31 to 180 days of delinquency – was 6.3% against 2.2% at the end of FY25.
Time of India
09-06-2025
- Business
- Time of India
Non-bank lender stocks surge after RBI policy announcement and relaxed norms boost sector outlook
This is a representative image MUMBAI: Shares of non-bank lenders surged on Monday following the RBI 's policy announcement on June 6, with many NBFC and small finance bank stocks posting sharp gains. The central bank's decision to reduce risk weights on retail loans for well-capitalised NBFCs and its dovish signals on liquidity lifted sentiment across the sector. Capri Global jumped 15.2%, Five Star rose 9.2%, and Edelweiss climbed 8%. IIFL gained 7.5%, Bandhan Bank added 7.1%, and Geojit Financial advanced 6.9%. JM Financial, Arman Financial, and Fedfina were up 6.7%, 6.5%, and 5.9%, respectively. Among small finance banks, ESAF gained 5.8%, Utkarsh 4.6%, and Jana Small Finance 5.7%. RBL Bank added 5.3%, Fusion rose 5.2%, and IREDA was up 5.2%. Wealth and asset managers such as UTI AMC and SMC Global rose 4.3% and 4.4%, respectively, while MCX gained 6.8%. The RBI also relaxed norms for microfinance lenders and small finance banks, further boosting the outlook for the broader sector. For NBFC-MFIs, the qualifying asset criteria were eased, allowing them to diversify up to 40% of their portfolio beyond microloans. This is expected to reduce concentration risk, improve balance sheet resilience, and enhance earnings stability. For small finance banks, lower risk weights on microfinance loans will reduce capital requirements and expand lending capacity. These moves, combined with a supportive macro environment, are expected to aid credit growth and financial inclusion across underserved segments. 'For NBFCs that operate extensively in tier 2 and tier 3 towns, this policy move opens up new momentum for credit-led expansion. The broader implication of this rate cut cycle is significant as it reflects a forward-looking strategy that is aligned with India's vision for inclusive and sustained growth. As highlighted by the RBI Governor, this brings the country a step closer to the goal of Viksit Bharat 2047. With rural resilience and continued expansion in services, both urban and rural consumption are poised to become strong drivers of India's next growth phase,' said Umesh Revankar, Executive Vice Chairman, Shriram Finance. Emkay Global said in a research note, 'The RBI heard the practical challenges of the new gold loan rules and adjusted them accordingly. We see this as a sign of the regulator wanting to remove friction in banks' and NBFCs' ability to lend, as far as possible.' According to Vivek Singh , CEO, Home Credit India, 'The recognition of abating stress in unsecured personal loans and ongoing recalibration efforts reinforces our commitment to robust underwriting and collection practices, supporting a healthier credit environment and India's growth.' George Alexander Muthoot, MD, Muthoot Finance, said, 'For NBFCs, this is an encouraging move as it creates a favourable environment by lowering borrowing costs and extending affordable credit to underserved communities. The move, coupled with a lowered inflation outlook, is likely to support domestic consumption and stimulate credit demand in the coming quarters. Overall, we view this as a timely and positive intervention that can support a stronger credit cycle in FY26. ' Stay informed with the latest business news, updates on bank holidays and public holidays . AI Masterclass for Students. Upskill Young Ones Today!– Join Now
