RBI Eases Qualifying Asset Criteria For NBFC-MFIs, Lowers Threshold To 60%
With this move, the MFIs can now allocate a larger portion of their assets to products beyond microfinance.
In a significant regulatory shift, the Reserve Bank of India revised on Friday the qualifying asset criteria for non-banking financial institutions-microfinance institutions.
The central bank lowered the minimum requirement for qualifying assets from 75% to 60% of total assets net of intangible assets on an ongoing basis. The RBI has aligned the definition of ‘qualifying assets’ for NBFC-MFIs with that of "microfinance loans", it said in a press release on Friday.
Under the updated framework, qualifying assets are defined as collateral-free loans extended to households with an annual income of up to Rs 3 lakh. These loans, which form the backbone of the microfinance sector, are designed to support low-income households and promote financial inclusion.
The new norms will provide greater operational flexibility to the NBFC-MFIs, potentially enabling them to diversify their portfolio while maintaining a strong focus on microfinance lending.
If an NBFC-MFI fails to meet the 60% qualifying asset requirement for four consecutive quarters, it is mandated to approach the RBI with a remediation plan for regulatory review and further action.
With this move, MFIs can now allocate a larger portion of their assets to products beyond microfinance.
"This policy shift will enable accelerated diversification within our operations, ensuring balance sheet stability and positioning us for robust cross-cycle earnings," Ganesh Narayanan, chief executive officer at CreditAccess Grameen, said.
This move has come as the microfinance sector has been undergoing stress for a while now due to overleveraging of borrowers. As of March 31, the outstanding loan book for the microfinance industry shrank to Rs 3.8 lakh crore, compared with Rs 4.4 lakh crore a year ago.
While loans at risk in the 1–30-day past-due bucket have improved to 1.4% in March 2025, compared to the peak of 2.1% in September, longer-term loan defaults are only rising, according to a recent CRIF Microlend report.
Loan portfolio at risk in the 91–180-day past-due bucket rose to 3.4% as of March 2025, compared with 3.2% in December 2024 and 0.9% in March 2024. Similarly, loans which are in default for over 180 days rose to 5.1% in March, compared with 3.7% in December and 1.6% a year ago, the CRIF Microlend report says.
