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Microfinance Lenders Hike Rates After RBI Repo Cuts

15 July 20251 min read
ECONOMYMicrofinanceLenders HikeRates After RBIRepo Cuts15 July 2025safalsetu.com

Why in the news

Borrowers of microfinance loans did not see the benefit of lower policy rates. Lenders said their own costs remained high.

Key facts

  • Policy move: repo rate cut by 100 bps; transmission to end borrowers was expected.
  • Raised rates (June-July 2025): CreditAccess Grameen, Muthoot Microfin, Fusion Finance.
  • Repeat revisions: Asirvad and Arohan, both earlier penalised for excessive interest rates.

Reasons given

  • High credit cost as post-pandemic asset quality stays under pressure.
  • Sticky borrowing costs: banks and capital markets have not yet passed on lower rates.
  • Operational costs of rural outreach and servicing.

Exam angle

  • Term: monetary policy transmission.
  • Repo cut: 100 bps.
  • Institutions: NBFC-MFIs.

Test yourself

1. By how much had RBI cut the repo rate in recent months, as noted in the MFI lending rate story?

The notes mention a 100 bps repo rate cut.

2. Which of these microfinance institutions raised lending rates between June and July 2025?

Muthoot Microfin was among the NBFC-MFIs that hiked rates.

3. Which factor did MFIs cite for raising rates despite RBI's cuts?

MFIs said banks and capital markets had not yet passed on lower rates.

This topic is part of Daily Current Affairs 15 July 2025 (16 topics).

All topics of the dayDay quizJuly 2025

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