Lack of financing places small and medium -sized MFIs in a difficult place Photocredit: Marchmeena29
Banks, in particular the public sector (PSBs), have stopped expanding loans under “A” rated micro-financing institutions (MFI) while stress continues to rise in the sector, sources say.
“Last year’s negative developments in the sector have led most banks to include the financing from MFIs. Most PSBs, which generally expand loans to MFIs, in particular State Bank of India, have become a bit careful. Even DFIs such as Nabard and Sidbi have sharpened their financing criteria. Year, “a industry in the industry,” an industry industry said.
SBI has formed an internal guideline that limits sanction loans to any MFI that is assessed under the “A” category. If the lender receives a loan proposal from a lower MFI rated, it must be screened by MD level officially at the bank. A senior official with a large MFI shared similar views and said large PSBs that were usually the primary lenders for MFI companies of all sizes have become extremely risk -aging at the front. Lack of financing places small and medium -sized MFIs in a difficult place, because bank loans are their primary and largest financing source due to a lack of access to the debt market. SBI did not respond to the questions until time.
MFIS ‘Q1FY26 Snapshot
The credit costs of the large MFI player Creditaccess Grameen rose to £ 572 crore in Q1FY26 from £ 175 crore in Q1FY25, but it was lower than £ 583 in Q4FY25. Another MFI Satin CreditCare saw its credit costs rise by 29 percent and 100 percent in the year to year to £ 143 crore in Q1.
The net loss of Fusion Finance amounted to £ 92.25 crore and the MFI has violated covenants at £ 3,567 crore in loans. It is looking for exemptions for lenders to continue in the activities. Fusion Finance and Spandana Spurs have also witnessed a change in CEO in recent months.
Recovery in H2FY26
According to industry players, the stress of MFIs will probably normalize in H2FY26. “… the prospects for FY26 remain encouraging with favorable monsoon prognoses and strengthening the national sentiment … Our strong business momentum and stabilizing asset quality position us good to deliver a robust profitability in the second half of FY’26 as Ganayan, Cee Ganayan said.
Jiji Mammen, CEO of SA-Dhan, also said that Q1FY26 has shown better trends in activa quality. “The par value (portfolio) value of Q1 about buckets is better than last quarter, except for the 180-day plus bucket bucket. Our data suggests that since Q3FY25, stress has been reduced, it may not be very high, but a few basic points,” he said.
Instructions
1- Fusion Finance Gives Covenants at £ 3,567 Crore in loans; Looking for exemption from lenders to continue with OPS.
2- SBI was the internal guideline that limited loans to MFI rated under the “A” category. Each loan proposal of low -rated MFI must be screened by the MD of the bank.
3- Financing for MFIs Down 50 percent, according to industry estimates. MFIs expect stress to normalize in H2FY26.
Published on August 10, 2025
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