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What are non-banking financial companies- microfinance institutions (NBFC-MFIs)?

Topics Covered: Inclusive growth and issues arising from it.

What are non-banking financial companies- microfinance institutions (NBFC-MFIs)?


NBFC MFI is a non-deposit taking NBFC (other than a company licensed u/s 25 of the Indian Companies Act, 1956) that meets the following conditions:

  1. Minimum Net Owned Funds (NOF) of Rs.5 crore. (For those registered in the North Eastern Region of the country, Rs. 2 crore is required as minimum NOF).
  2. At least 85% of its Total Net Assets are in the nature of “Qualifying Assets.”

What are Qualifying Assets?

“Net assets” are total assets excluding cash, bank balances, and money market instruments.

“Qualifying assets” are those assets which have a substantial period of time to be ready for its intended use or sale.

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Why in News?

Loan disbursements by non-banking financial companies-microfinance institutions (NBFC-MFIs) declined 96% to ₹570 crore in the first quarter of the current financial year, according to a report by Microfinance Institutions Network (MFIN).

●        It had stood at ₹15,865 crore in the corresponding quarter of the previous year.

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Prelims Link:

  1. NBFCs- meaning.
  2. Types.
  3. NBFCs under RBI.
  4. NBFC-MFI- eligibility, functions.
  5. What is Net Owned Funds?
  6. What are Qualifying Assets?

Sources: the Hindu.