Brief Overview:
Minimum exposure requirement to microfinance loans reduced to 60% of the total assets for NBFC-MFIs, from the earlier requirement of 75%.
Technical Details:
The Reserve Bank of India (“RBI”), pursuant to its notification on ‘Review of Qualifying Assets Criteria’ dated 06 June 2025 (“RBI Notification”), has relaxed the qualifying assets requirement for the NBFC-MFIs, thereby permitting them to maintain 60% of their total assets (netted off by intangible assets), on an ongoing basis, in microfinance loans, as opposed to the erstwhile requirement of 75%.
Further, if an NBFC-MFI fails to keep qualifying assets at the aforesaid threshold for 4 (four) consecutive quarters, it must present the RBI with a remediation plan for its view on the matter.
Key Takeaways:
The RBI Notification shall enable NBFC-MFIs to maintain a broader loan portfolio and manage its books to minimise involved risks. NBFC-MFIs often borrow monies under the external commercial borrowing route and otherwise also, wherein the amounts borrowed by it are utilized towards on-lending in relation to microfinance loans. Given this lowering of threshold, it will be interesting to see whether creditors to such NBFC-MFIs are further incentivised to lend to such NBFC-MFIs and if so, for what purposes.
For further details, please see:
Reserve Bank of India – Notifications
For any queries/clarifications, please feel free to ping us and we will be happy to chat:
