| 32 Annual Report | 2025-2026 states, Tamil Nadu registers the highest average loan outstanding per account at INR 35,887. Source MFIN Micrometer issue 57 KEY INDUSTRY HIGHLIGHTS OF FY 2026 RBI Revises Qualifying Assets Criteria for NBFC-MFIs: The Reserve Bank of India’s revision of the Qualifying Assets (QA) requirement for NBFC-MFIs from 75% to 60% of total assets (net of intangible assets) represents a significant regulatory development for the microfinance sector. The revised framework provides greater operational flexibility while preserving the sector’s core focus on financial inclusion and microfinance lending. The change addresses practical challenges faced by NBFC-MFIs in managing liquidity, capital infusions, and portfolio transactions, which previously resulted in technical breaches of the QA threshold despite continued adherence to the spirit of the regulations. By aligning regulatory requirements more closely with operational realities, the revised norm is expected to strengthen compliance and improve portfolio management. For NBFC-MFIs, the enhanced flexibility creates opportunities to diversify a portion of their portfolio into adjacent segments such as micro-enterprise financing, affordable housing, and other products catering to customers graduating beyond traditional microfinance. This enables institutions to support the evolving credit needs of borrowers while fostering stronger customer relationships and improving portfolio resilience. Overall, the revised QA framework is expected to enhance the long-term sustainability of NBFC-MFIs, support prudent risk management, and strengthen their ability to drive inclusive growth while maintaining a clear focus on serving underserved and low-income communities. The Bihar Micro Finance Institutions (Regulations of Money Lending and Prevention of Coercive Actions) Bill, 2026: The Bihar Micro Finance Institutions (Regulations of Money Lending and Prevention of Coercive Actions) Bill, 2026 introduces enhanced borrower protection measures and stricter oversight of loan recovery practices within the State of Bihar. While regulated entities such as Banks and NBFC-MFIs remain outside the scope of certain licensing and registration provisions, key requirements relating to fair recovery practices, borrower protection, and the prohibition of coercive recovery methods are expressly applicable to all lending institutions operating in the state. The legislation underscores the importance of maintaining robust customer protection frameworks, transparent collection processes, and strong governance standards. The Bill also prescribes significant penalties for noncompliance and extends accountability to directors and officers responsible for business operations, unless they can demonstrate adequate oversight and due diligence. For NBFC MFIs, the Bill reinforces the need for continued adherence to responsible lending and recovery practices, enhanced monitoring of field operations, regular staff training, and strengthened compliance controls to mitigate regulatory and reputational risks while supporting sustainable financial inclusion. MICROFINANCE SECTOR Opportunities The Indian microfinance sector is supported by strong structural fundamentals that position it well for sustainable long-term growth. One of the sector’s key strengths is its integration with the PSL framework, which enables banks to channel funds to NBFC-MFIs for onward lending to underserved communities. This creates a stable funding pipeline, strengthens institutional partnerships, and supports the sector’s growth momentum. Another important strength lies in the proven effectiveness of the JLG model. By leveraging group accountability and community relationships instead of physical collateral, the model has helped maintain strong repayment behaviour and expand access to credit among low-income households. This unique lending framework continues to be a key differentiator for the industry. The sector also enjoys deep penetration across rural and semi-urban India, where formal credit access remains relatively low. Through extensive branch networks and strong field-level presence, microfinance institutions have built trusted customer relationships and gained deep -30% -14% -5% -32% -3% 143.59 86.03 51.24 40.01 4.30 NBFC-MFIs Balnks SFBs NBFCs Others Growth Pa ern % Growth % year on year POS (₹ ‘000 Cr) Management Discussion & Analysis
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