New Delhi, Mar 7 (KNN) Non-banking financial companies with microfinance arms (NBFC-MFIs) in India are increasingly expanding into non-microfinance credit segments such as MSME loans, loan-against-property (LAP), affordable housing and vehicle financing as part of a strategic shift to diversify risk and reduce portfolio concentration.
Industry participants say that evolving regulatory norms and socio-political factors in key states have encouraged the move away from a sole reliance on traditional microloans, reported the Business Standard.
Several state governments, including Bihar, Karnataka and Tamil Nadu, have introduced legislation to strengthen oversight and curb coercive recovery practices, which has influenced lender behaviour.
Established NBFC-MFIs such as CreditAccess Grameen, Satin Creditcare Network, Spandana Sphoorty Financial and Arohan Financial Services have been progressively building their presence in adjacent secured and semi-secured lending categories over recent quarters.
Executives in the sector have pointed to political rhetoric around loan waivers and borrower protection during election periods as factors that can impact collections and repayment discipline in the microfinance business. Growing concerns over borrower over-indebtedness and regional disruptions have also weighed on unsecured portfolios.
As a result, lenders are deliberately trimming the share of pure microfinance loans in their overall books, while secured products such as LAP, MSME, gold loans, housing and vehicle finance gain traction. Despite this shift, microfinance remains a core business, although its relative contribution to total assets under management is gradually declining.
Industry experts believe the diversification strategy could help improve balance-sheet stability and reduce vulnerability to sector-specific shocks over the medium term.
(KNN Bureau)
