NBFC, fintechs' micro loan play catches regulatory attention

Even as the overall indebtedness of micro borrowers has been under control since the introduction of guardrails last year by the Microfinance Industry Network (MFIN), a self-regulatory organisation (SRO), non-banking financial companies (NBFCs) and fintechs are now increasing lending to these bottom of the pyramid segments, a development which is being closely monitored by the regulator.

- MANOJIT SAHA

Meanwhile, with banks turning reluctant to extend loans to the microfinance institutions (MFIs), the overall loan portfolio of these lenders has fallen 22 per cent since 2024, resulting in nearly 400,000 borrowers moving out of formal finance.

Following the introduction of the third set of guardrails, which came into effect from April 1 this year, the number of micro lenders per borrower was capped at three by the MFIN.