Exclusion from sharing, accessing credit info puts non-profit MFIs in a bit of a spot

The outstanding loan portfolio of the microfinance industry shrunk by 15.5 per cent y-o-y to ₹3,41,947 crore as at September-end 2025
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The Reserve Bank of India’s rigorous enforcement of credit data-sharing protocols has posed challenges for non-profit microfinance institutions (MFIs) registered as Section 8 companies. As unregulated entities, these MFIs have been barred by the RBI from exchanging credit information with Credit Information Companies (CICs) under the Credit Information Companies (Regulation) Act, 2005.

This regulatory stance emerged following RBI inspections last year that identified non-compliance with CICRA provisions regarding information exchange with unlicensed institutions. The Act limits credit data sharing exclusively with regulated financial entities including banks, NBFCs, housing finance companies, and specified institutions.

Industry representatives highlight that excluding non-profit MFIs from credit data networks could compromise financial inclusion efforts and risk multiple lending exposures. Microfinance associations have petitioned the RBI to either permit continued CIC access for Section 8 MFIs or facilitate their conversion to NBFC status for regulatory compliance.

Market observers warn this exclusion creates informational blind spots that could enable unscrupulous borrowers to obtain multiple loans across regulated and unregulated lenders. Regulatory responses to these concerns remained unavailable at publication time.

Operational Framework and Market Impact

India’s credit reporting ecosystem comprises four RBI-registered CICs: TransUnion CIBIL, Equifax, Experian, and CRIF High Mark. Microfinance loans are defined as collateral-free credit products for low-income households earning under ₹3 lakh annually.

Recent sector data reveals divergent trends among lender categories. Non-profit MFIs recorded substantial 76% year-on-year growth in outstanding loans through September 2025, contrasting with significant declines across other segments:

– Small Finance Banks: 22% reduction
– Scheduled Banks: 19% decrease
– NBFC-MFIs: 17% contraction
– Other NBFCs: 3% decline

The overall microfinance portfolio decreased 15.5% year-on-year to ₹3,41,947 crore, attributed to liquidity constraints, operational hurdles, reduced disbursements, lower client retention rates, and increasing portfolio risk metrics.

Published on January 8, 2026