MFIs turn aggressive lenders, signs of overborrowing emerge in microlending

With multiple financial institutions chasing same set of borrowers in rural areas, signs of over-borrowing are now apparent in the microfinance sector. In fact, close to 20-30 per cent of applications received by micro lending institutions are now getting rejected on account of existing excess borrowing.

Banks now account for a major 37 per cent of MFI portfolio, while small finance banks (SFBs) control another 22 per cent of the portfolio. The rest is accounted by NFBFC MFI, NBFCs and non-profit making MFIs.  

The present regulations governing over-indebtedness applies only to NBFCs MFIs and MFIs (non-profit ones). According to RBI