NBFC-MFI Qualifying Asset Norm Cut to 60% by RBI
Why in the news
RBI eased a key rule for microfinance NBFCs, giving them room to hold a smaller share of microfinance loans in their books.
Key facts
| Point | Earlier | Now |
|---|---|---|
| Qualifying assets as share of total assets (net of intangibles) | 75% | 60% |
| Maintenance | – | On an ongoing basis |
- Qualifying assets are the microfinance loans an NBFC-MFI must hold to be classified in the sector.
- Compliance: an NBFC-MFI that misses 60% for four consecutive quarters must file a remediation plan with RBI for review and approval.
Implications
- Lets NBFC-MFIs diversify their asset mix beyond microfinance loans.
- Improves financial strength and operating flexibility.
- Allows wider services and a broader borrower base.
- Supports loans with more adaptive terms.
Exam angle
- New threshold: 60% (from 75%).
- Trigger for remediation plan: four consecutive quarters of shortfall.
- Regulator: RBI.