Norms for NBFC-MFIs have been eased by RBI

Current Context: On June 6, 2025, the Reserve Bank of India (RBI) eased norms for NBFC-MFIs (Non-Banking Finance Company – Microfinance Institutions) by lowering the qualifying asset threshold from 75% to 60%.

What This Means:

• Flexibility for NBFC-MFIs: Previously, these institutions had to ensure 75% of their assets were microfinance loans (collateral-free loans to households earning up to ₹3 lakh annually). Now, only 60% needs to be in microfinance, allowing them to diversify their lending portfolio.
• Compliance Monitoring: If an NBFC-MFI fails to maintain this 60% threshold for four consecutive quarters, it must submit a remediation plan to the RBI.
• Impact on Financial Inclusion: The change enables NBFC-MFIs to expand into other lending areas, such as SME loans and affordable housing finance, while continuing microfinance services.

Question:

Q.1 As per the RBI’s notification on June 6, 2025, what is the new minimum qualifying asset threshold for NBFC-MFIs?
a) 75%
b) 65%
c) 60%
d) 50%

Answer: c) RBI lowered the qualifying asset threshold from 75% to 60%, allowing NBFC-MFIs more flexibility in lending beyond traditional microfinance.