The outstanding loan portfolio of the microfinance industry shrunk by 15.5 per cent y-o-y to ₹3,41,947 crore as at September-end 2025
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Strict enforcement of the rule book by the Reserve Bank of India (RBI) on sharing credit information with credit information companies (CICs) and accessing it from them has put non-profit microfinance institutions (MFIs) in a bit of a spot.
Since the aforementioned MFIs (Section 8 companies) are not regulated entities, the central bank has told CICs that exchange of credit information is not permissible with the former under the Credit Information Companies (Regulation) Act (CICRA), 2005.
This comes in the wake of an inspection of CICs books last year, with RBI inspectors highlighting that credit information exchange between them and non-profit MFIs is inconsistent with CICRA.
As per CICRA, credit institutions include banks, non-banking financial companies (NBFCs), public financial institutions, State financial corporations, housing finance companies, companies engaged in the business of credit cards and other similar cards and companies dealing with distribution of credit in any other manner; and any other institution which the Reserve Bank may specify.
Jiji Mammen, Executive Director & CEO, Sa-Dhan, emphasised that non-profit MFIs are also a part of the ecosystem furthering the cause of financial inclusion. But if these entities are kept out of the credit information network, they will not know if a prospective borrower already has a liability with another institution or a regulated entity and vice-versa.
In this regard, Sa-dhan, which is an association of impact finance institutions and an RBI appointed Self-Regulatory Organization (SRO) for MFIs, has requested the central bank that either Section 8 MFIs be allowed to continue as a part of the credit information network or be permitted to convert into NBFCs so that they qualify as a credit institution under CICRA, Mammen added.
Industry experts say precluding non-profit MFIs from accessing the credit information network could have implications for microlenders as multiple loans can be taken by some unscrupulous borrowers by taking advantage of the credit information blind spot.
An email sent to RBI seeking comments for the story remained unanswered when this story was written.
Four CICs
There are four CICs registered with RBI — TransUnion CIBIL, Equifax Credit Information Services, Experian Credit Information Company and CRIF High Mark Credit Information Services.
All collateral-free loans to individual/s belonging to low-income households — households having annual income up to ₹3 lakh — are classified as microfinance loans.
According to Sa-Dhan’s quarterly microfinance report (July-September 2025) report, the “others category”, which includes non-profit MFIs, was the only microlender category bucking the trend of fall in outstanding loans. These lenders posted a strong 76 per cent year-on-year(y-o-y) growth in outstanding loans.
As at September-end 2025, Small Finance Banks (SFBs) recorded the steepest y-o-y decline of 22 per cent in outstanding loans, followed by banks at 19 per cent, NBFC-MFIs at 17 per cent, and NBFCs at 3 per cent.
The outstanding loan portfolio of the microfinance industry shrunk by 15.5 per cent y-o-y to ₹3,41,947 crore as at September-end 2025 due to multiple factors, including liquidity crunch, operational challenges, declining disbursements, lower client retention, and rising PAR (Portfolio at Risk) levels.
Published on January 8, 2026
