7 | Annual Report | 2024-2025 a deep and robust credit market. Having said this, a distressed borrower programme is also required to address genuine stress possible in this segment 9. Empowered and Accountable SROs: RBIrecognised Self-Regulatory Organisations (SROs) should be empowered to enforce stricter operational norms beyond regulatory minimums. These include caps on number of lenders per borrower, overall indebtedness, no lending to 30+ DPD borrowers, and borrower education standards. In cases where lenders violate norms, SROs must have the authority to intervene, suspend collections, or recommend penalties. 10. Financial Literacy as a National Mission: Households earning under INR 3 Lakh annually require targeted, structured financial education. While MFIs often provide this during loan onboarding, broader & ongoing efforts from RBI, NABARD, state governments, and the Ministry of Finance are needed to build a culture of responsible borrowing and credit awareness across India’s base-of-the-pyramid population I was honoured to be the Chairman of the Governing board at Micro Finance Industry Network (MFIN), our industry Self Regulatory Organisation (SRO) for the year 2024-25. This is my third stint on the board and feel humbled by the support and confidence reposed by the members and fellow directors. Building consensus on the need to do, we moved ahead and launched the MFIN Guard Rails 1.0 in early July 2024 building on the broad RBI norms of Household Income Assessment and Fixed Obligations to Income ratio. MFIN Guard Rails 1.0 essentially prescribes what good underwriting entities like us had put in place: cap on number of lenders to a borrower, an indebtedness ceiling, no additional credit to a delinquent borrower amongst others. We tightened the Guard Rails further in January and then again in April 2025. The tracking from the credit bureau data and then escalation from the management to the board and finally to the RBI ensures seriousness and adherence. I am happy to inform you that Arohan has consistently been in the Top 3 on adherence with less than 2/3% deviations from the norms. For a company which prides itself on a high level of governance and transparency, the RBI Cease & Desist order served on us late October 2024 was a shock across levels – company, board, employees and the external world including the lenders and investors. Clearly our growth in NIM’s since FY 2023, the outstanding & profits in in FY 2024 v/s the previous year stood out and was picked up. We engaged with RBI at all levels and with the interactions, data submitted and clarifications given had the second fastest exit of our Cease & Desist in just 2.5 months. It was a difficult period especially for our employees & borrowers, but a learning experience which will keep us in good stead in the future. Arohan has always pushed the envelope to be ahead of the sector on new initiatives: operating on a Core Banking System (CBS), our own scoring
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