Microfinance: Evolution Over Overhaul, Says Summit Leaders

At the BT Best Banking & Economy Summit, Ravi Narayanan, MD & CEO of SMFG India Credit, argued that microfinance does not require a structural overhaul but a measured evolution. He emphasized that the sector’s foundational goal — to bring the “credit invisible” into the formal system — is largely achieved in India, and that as aspirational households move toward asset building, diversification is a natural next step for financial institutions. Narayanan cautioned against abrupt policy shifts or sudden structural changes that could trigger volatility, calling for stability, responsible growth and robust customer protection while letting the industry evolve organically through cycles.

Dr. Alok Misra, CEO & Director of the Microfinance Institutions Network (MFIN), pushed back on the notion of “brutal stress” in microfinance. While headlines cite 16% NPAs and ₹55,000 crore in stressed assets, Misra noted that Portfolio At Risk stands at 4.7%. He attributed the spike to external disruptions — heatwaves, state-level agitations and policy uncertainty — rather than fundamental underwriting failures. With 96.4% of loans compliant with RBI norms and guardrails in place, Misra argued that peak stress has likely passed, even as the sector faces a funding winter and seeks stable capital inflows.

Looking ahead, Dr. Misra outlined that pure MFIs may need to diversify to sustain growth. He described a vision up to 2030–32 where credit remains core but MFIs expand into insurance and pension distribution through NBFC partnerships. He stressed scaling nano and micro enterprises as essential for inclusive growth, urging policymakers, lenders and regulators to work together to ensure sustainable sector performance in the years ahead.

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