RBI asks microfinance lenders to prioritise borrower income stability

Reserve Bank of India has urged microfinance institutions (MFIs) to shift focus from mere access to credit towards ensuring long-term income stability and formal credit pathways for borrowers, warning that regulatory flexibility must be matched with responsible conduct.

Speaking at the launch of the India Microfinance Review FY25, Deputy Governor Swaminathan J said the sector has reached an inflection point after a decade of rapid expansion driven by Jan Dhan, Aadhaar, UPI and account aggregator frameworks. He emphasised that the next phase must prioritise depth, quality and sustainability of financial inclusion.

“The objective is to convert first access into regular use, regular use into stable income, and stable income into formal credit,” he said. Swaminathan cautioned that misuse of regulatory freedom could undermine borrower welfare.

He outlined five key priorities for MFIs: household-level credit assessment, technology-driven underwriting, diversification into micro-enterprise finance, climate-resilient product design and responsible data usage. He also warned against unreasonable pricing, inaccurate credit bureau reporting, model bias and cybersecurity risks, stating that these factors could stall the sector’s long-term progress if left unaddressed.

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