The microfinance sector’s outstanding loan portfolio shrank 15.5 percent year-on-year to ₹3,41,947 crore at end-September 2025 | Photo credit: iStockphoto
Since the above-mentioned MFIs (Section 8 companies) are not regulated entities, the central bank has told the CICs that exchange of credit information with the former is not permitted under the Credit Information Companies (Regulation) Act (CICRA), 2005.
This comes in the wake of an inspection of the books of CICs last year, with RBI inspectors highlighting that the exchange of credit information between them and non-profit MFIs is inconsistent with CICRA.
According to CICRA, credit institutions include banks, non-banking financial companies (NBFCs), public financial institutions, state financial institutions, housing finance companies, companies dealing with credit cards and other similar cards and companies otherwise engaged in the distribution of credit; and such other institution as the Reserve Bank may specify.
Jiji Mammen, Executive Director and CEO of Sa-Dhan, emphasized that non-profit MFIs are also part of the ecosystem that furthers the cause of financial inclusion. But if these entities are kept outside the credit reporting network, they will not know whether a potential borrower already has an obligation with another institution or a regulated entity, and vice versa.
In this regard, Sa-dhan, an association of impact finance institutions and an RBI-appointed self-regulatory organization (SRO) for MFIs, has requested the central bank to either allow Section 8 MFIs to continue as part of the credit information network or be allowed to be converted into NBFCs so that they qualify as a credit institution under the CICRA, Mammen added.
Industry experts say excluding non-profit MFIs from accessing the credit information network could impact microlenders as some unscrupulous borrowers may take multiple loans by taking advantage of the credit information blind spot.
An email sent to RBI seeking comment on the story went unanswered at the time of writing this story.
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 individuals belonging to low-income households (households with annual income up to ₹3 lakh) are classified as microfinance loans.
According to Sa-Dhan’s quarterly microfinance report (July-September 2025), the ‘others’ category, which includes non-profit MFIs, was the only category of microlenders that managed to break the trend of a decline in outstanding loans. These lenders posted strong 76 percent year-over-year growth in outstanding loans.
At the end of September 2025, Small Finance Banks (SFBs) recorded the steepest year-on-year decline of 22 percent in outstanding loans, followed by banks at 19 percent, NBFC-MFIs at 17 percent and NBFCs at 3 percent.
The microfinance sector’s outstanding loan portfolio contracted 15.5 percent year-on-year to ₹3,41,947 crore at end-September 2025 due to multiple factors including liquidity crunch, operational challenges, declining disbursements, lower customer retention and rising PAR (Portfolio at Risk) levels.
Published on January 8, 2026
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