Bank Credit to NBFCs and MFIs Stays Weak Despite RBI Relief
Why in the news
Even after RBI restored lower risk weights, mid-sized and small NBFCs and MFIs still struggle to get bank funds.
Key facts
| Indicator | Latest | Earlier |
|---|---|---|
| Bank credit to NBFCs (21 Mar 2025) | +5.7% to ₹16.36 trillion | +15.3% |
| Microfinance loans (Dec 2024) | -4% to ₹3.91 trillion | – |
| Services-sector credit | 13.4% | 28% |
- Top-rated NBFCs keep stable funding and benefit most.
- Smaller NBFCs/MFIs gain little due to conservative banks.
Why banks hold back
- Rising microfinance delinquencies.
- Wait-and-watch stance for one to two more quarters.
- Loan rates not expected to fall.
- MFIN norm, from early 2025, caps borrowers at three lenders.
Way forward
- Better credit quality, borrower-protection compliance and sector performance.
Exam angle
- Date of risk-weight rollback: 1 April 2025.
- MFIN = Microfinance Industry Network.