What changed
The qualifying assets definition for NBFC-MFIs is now aligned with the broader 'microfinance loans' definition from the Master Direction. The minimum threshold remains 60% of total assets (net of intangibles), but the compliance clock resets with this circular. Previously, the criterion was based on a different definition of qualifying assets.
What it means for you
NBFC-MFIs must ensure their microfinance loan portfolio consistently meets the 60% threshold on an ongoing basis. Falling short for four straight quarters triggers mandatory RBI engagement with a remediation plan. This tightens the link between asset classification and regulatory status, potentially impacting lending strategies and portfolio composition.
What you must do
- Review your current asset composition to confirm microfinance loans meet 60% of net total assets (excluding intangibles).
- Monitor the qualifying assets ratio quarterly and set internal triggers to avoid four consecutive quarters of non-compliance.
- Prepare a remediation plan template in case the threshold is breached for four quarters, detailing steps to restore compliance.
- Update internal policies and reporting systems to align with the revised definition of qualifying assets as per microfinance loans.
Who it affects
All NBFC-MFIs registered with RBI, Compliance and risk management teams of NBFC-MFIs, Auditors and consultants advising NBFC-MFIs on regulatory adherence
What is the new qualifying assets threshold for NBFC-MFIs?
NBFC-MFIs must maintain qualifying assets (aligned with microfinance loans definition) at a minimum of 60% of total assets, net of intangible assets, on an ongoing basis.
What happens if an NBFC-MFI fails to meet the 60% threshold for four consecutive quarters?
The NBFC-MFI must approach the Reserve Bank with a remediation plan outlining steps to rectify the shortfall, and RBI will take a view on the matter.
When does this revised criterion take effect?
The revised provisions are effective from the date of the circular, i.e., June 06, 2025.