# NBFC-MFI Directions 2025: key norms and sanction checks

> RBI's NBFC-MFI Directions, 2025: minimum 60 percent qualifying assets, 15 percent capital adequacy, 90-day NPA test, provision norms and sanction checks.

Source page: https://creditbrief.in/posts/nbfc-mfi-directions-2025
Published: 2026-11-06
Publisher: CreditBrief

The Reserve Bank of India (Non-Banking Financial Companies – Microfinance Institution) Directions, 2025 (the NBFC-MFI Directions), dated November 28, 2025, set three anchor numbers for NBFC-MFIs: at least 60 percent of total assets, net of intangibles, in microfinance loans; a capital adequacy ratio of at least 15 percent; and a 90-day test for non-performing status. A microfinance loan of an NBFC-MFI turns non-performing when interest or principal is overdue for more than 90 days.

The notification reference is RBI/DOR/2025-26/371, DOR.FIN.REC.290/03-10-038/2025-26, and the [full text is on the RBI website](https://www.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=12933). Paragraph numbers on this page refer to that text. Para 2 says the NBFC-MFI Directions come into effect on the day they are placed on the RBI website.

An NBFC-MFI is a non-deposit taking NBFC that keeps at least 60 percent of its total assets, net of intangible assets, in microfinance loans on an ongoing basis (para 8(3)). Much of the remaining rulebook works by reference to other 2025 directions, so the NBFC-MFI Directions alone will not settle every sanction question.

## What are the key norms in the NBFC-MFI Directions, 2025?

The key norms in the NBFC-MFI Directions, dated November 28, 2025, are listed below with the lender type each one covers.

| Norm | Benchmark | Covers | Para |
|---|---|---|---|
| Qualifying assets | Minimum 60 percent of total assets, net of intangibles, on an ongoing basis | NBFC-MFIs | 8(3), 12 |
| Qualifying assets shortfall | If missed for four consecutive quarters, approach RBI with a remediation plan | NBFC-MFIs | 12 |
| Capital adequacy | Tier 1 plus Tier 2 capital of at least 15 percent of aggregate risk-weighted assets on the balance sheet and risk-adjusted value of off-balance sheet items | NBFC-MFIs | 16 |
| Tier 2 limit | Not more than 100 percent of Tier 1 capital at any point of time | NBFC-MFIs | 17 |
| Non-performing asset (NPA) | Interest or principal overdue for more than 90 days | Microfinance loans of NBFC-MFIs | 22, 24 |
| Aggregate loan provision | At least the higher of (i) 1 percent of the outstanding loan portfolio, or (ii) 50 percent of instalments overdue more than 90 and less than 180 days, plus 100 percent of instalments overdue 180 days or more | Microfinance loans of NBFC-MFIs | 25 |
| Standard asset provision | As set for the NBFC-MFI's layer in the Income Recognition, Asset Classification and Provisioning Directions, 2025 | Microfinance loans of NBFC-MFIs | 27 |
| Guaranteed advances | No provision on the guaranteed portion of a non-performing advance covered by the Credit Risk Guarantee Fund Trust for Low Income Housing. The excess follows the Income Recognition, Asset Classification and Provisioning Directions, 2025 | NBFC-MFIs | 26 |
| Channelised government scheme loans | Left out of both numerator and denominator in the 60 percent test | NBFC-MFIs acting as channelising agents | 13 |
| Not for profit companies | Exemptions withdrawn at asset size of ₹100 crore and above, with registration as an NBFC-MFI required | Not for profit companies in microfinance | 14, 15 |
| Self-regulatory organisation (SRO) | Membership of at least one RBI-recognised SRO, and compliance with its Code of Conduct | NBFC-MFIs | 46 |
| Microfinance ceiling | Aggregate microfinance loans not above 25 percent of total assets | NBFCs that do not qualify as NBFC-MFIs | 49 |

## How does the 60 percent qualifying assets test work for NBFC-MFIs?

The 60 percent qualifying assets test in para 12 of the NBFC-MFI Directions compares an NBFC-MFI's microfinance loans with its total assets, net of intangible assets, on an ongoing basis. Reading the test well means watching both sides of the ratio.

- **Denominator growth matters.** Assets added outside microfinance lower the ratio even when the microfinance book is unchanged, because only the denominator grows.
- **Four quarters is a trigger, not an allowance.** Para 12 requires an NBFC-MFI that misses the test for four consecutive quarters to approach RBI with a remediation plan. A shorter shortfall is still below an ongoing minimum.
- **Channelised loans sit apart.** Para 13 treats government scheme loans handled as a channelising agent as a separate business segment, outside both sides of the test, with separate accounts and disclosure. Prudential norms still apply unless the NBFC-MFI bears no credit risk.
- **Wording differs for other NBFCs.** Para 12 nets off intangible assets for the 60 percent test. Para 49 says total assets for the 25 percent ceiling and does not mention netting.

## How does the NBFC-MFI provisioning test work?

The aggregate loan provision of an NBFC-MFI under para 25 of the NBFC-MFI Directions must, at any point of time, be at least the higher of two limbs, meaning two separate calculations. Limb (i) is 1 percent of the outstanding loan portfolio. Limb (ii) is 50 percent of instalments overdue more than 90 and less than 180 days, plus 100 percent of instalments overdue 180 days or more.

- **The two limbs respond to different things.** Limb (i) moves with book size. Limb (ii) moves with the amount and age of overdue instalments, so run both every time.
- **Ageing raises the requirement.** An instalment that reaches 180 days moves from the 50 percent rate to the 100 percent rate, with no new overdue amount.
- **The base is instalments, not balances.** Para 24 classifies the asset as non-performing, while limb (ii) counts overdue instalments. A portfolio can meet the minimum while the provision covers a modest share of the balance on NPA loans, so read provision against both figures.
- **Scope is microfinance loans.** Para 22 applies these norms to an NBFC-MFI's microfinance loans. Para 28 applies the rest of the Income Recognition, Asset Classification and Provisioning Directions, 2025 where not contradictory.
- **One point needs confirming.** Para 27 sends standard asset provisioning to those same directions by layer. The NBFC-MFI Directions do not spell out how that provision counts toward the para 25 aggregate, so confirm the treatment in the Income Recognition, Asset Classification and Provisioning Directions, 2025.

## How do the NBFC-MFI capital norms work?

The NBFC-MFI capital norms are two separate tests: para 16 of the NBFC-MFI Directions requires Tier 1 plus Tier 2 capital of at least 15 percent, and para 17 caps Tier 2 at 100 percent of Tier 1 at any point of time. A strong total ratio does not show that Tier 2 is within the cap, so check both.

Risk weights are not in the NBFC-MFI Directions. Paras 18 to 21 send capital treatment, including loans under the guarantee schemes named in para 20, to the Prudential Norms on Capital Adequacy Directions, 2025. Any recomputation of the ratio needs that text alongside.

## What should a credit manager check at sanction under the NBFC-MFI Directions?

A credit manager's checks under the NBFC-MFI Directions depend on where the credit manager sits. The rule column states what the NBFC-MFI Directions say. The check column is general working practice, and internal limits vary by institution.

| Seat | Rule | Check |
|---|---|---|
| Credit manager at an NBFC-MFI | Para 10 requires Board-approved internal exposure limits to avoid undesirable concentration in specific geographical locations, and gives no figure | Whether the proposed exposure fits the Board-approved limit for that location |
| Credit manager at an NBFC-MFI acting as channelising agent | Para 13 requires all scheme loans to be reported to Credit Information Companies, to prevent multiple borrowings and show complete indebtedness | Whether scheme loans are correctly tagged and reported, and whether the NBFC-MFI bears credit risk on them |
| Bank credit team lending to an NBFC-MFI | Para 48 places primary responsibility for compliance on the NBFC-MFI, and says banks lending to NBFC-MFIs shall also ensure that its systems, practices and lending policies align with the regulatory framework | Evidence, not assertion: the qualifying assets ratio by quarter, the capital workings, both provision limbs and SRO membership |
| Credit manager at an NBFC that is not an NBFC-MFI | Para 49 caps aggregate microfinance loans at 25 percent of total assets | Current book plus pipeline against the ceiling before sanction |
| Any reader of an NBFC-MFI file | Para 7 says an NBFC-MFI may lie in any layer of scale based regulation, the framework that tiers NBFC rules by layer, and para 4 applies the listed directions on that basis | The NBFC-MFI's layer, before reading any layer-based rule |

## Which questions do the NBFC-MFI Directions leave to other directions?

The NBFC-MFI Directions leave several sanction questions to other 2025 directions. Para 4 applies the listed directions where not contradictory, and para 5 makes the instructions additional, not a substitute.

| Question | Where the NBFC-MFI Directions send you | Para |
|---|---|---|
| What counts as a microfinance loan | Credit Facilities Directions, 2025 | 8(2) |
| Conduct and operating rules for microfinance loans of all NBFCs | Credit Facilities, Responsible Business Conduct and Managing Risks in Outsourcing Directions, 2025 | 49 |
| Risk weights and capital treatment | Prudential Norms on Capital Adequacy Directions, 2025, excluding its paragraphs 6(1), 6(2) and 17 | 18 to 21 |
| Registration | Chapter III of the Registration, Exemptions and Framework for Scale Based Regulation Directions, 2025 | 11 |
| Stressed asset resolution | Resolution of Stressed Assets Directions, 2025 | 29 |
| Credit bureau reporting | Credit Information Reporting Directions, 2025 | 41 |

The NBFC-MFI Directions state no borrower-level eligibility or repayment figure. Start with the Credit Facilities Directions, 2025 for the microfinance loan definition, and note that any internal limits vary by institution.

Para 50 of the NBFC-MFI Directions repeals the earlier instructions for NBFC-MFIs, as communicated in circular DOR.RRC.REC.302/33-01-010/2025-26 dated November 28, 2025. Under para 51, actions taken or initiated under the repealed instructions stay governed by them, and approvals or acknowledgments granted under them are deemed governed by the NBFC-MFI Directions.

## Worked example, made-up numbers

This worked example uses a hypothetical NBFC-MFI, with figures in ₹ crore.

**Qualifying assets**

| Item | Amount |
|---|---|
| Total assets | 1,060 |
| Less intangible assets | 10 |
| Less channelised loans | 50 |
| Adjusted total assets | 1,000 |
| Own microfinance loans | 640 |
| Ratio | 64 percent |
| Loans needed at 60 percent | 600 |
| Loan headroom, with total assets held constant | 40 |

Adding 100 of non-qualifying assets takes adjusted total assets to 1,100 and the ratio to 58.2 percent (640 / 1,100), below the minimum. The ratio reaches 60 percent at adjusted total assets of about 1,066.7, so the room for added non-qualifying assets is about 66.7.

Wrongly keeping the 50 of channelised loans on both sides gives 690 / 1,050, or 65.7 percent, which overstates the correct 64 percent.

**Capital**

| Item | Amount |
|---|---|
| Tier 1 capital | 150 |
| Tier 2 capital | 40 |
| Total capital | 190 |
| Aggregate risk-weighted base | 1,000 |
| Capital adequacy ratio | 19 percent |
| Capital needed at 15 percent | 150 |
| Surplus capital | 40 |
| Tier 2 as a share of Tier 1 | 26.7 percent |

On the same base, if Tier 2 sat at the 100 percent cap, meeting the 150 minimum would need Tier 1 of at least 75 (75 + 75).

**Aggregate loan provision on a portfolio of 640**

| Item | Case A | Case B | Case C |
|---|---|---|---|
| Limb (i): 1 percent of portfolio | 6.4 | 6.4 | 6.4 |
| Instalments overdue more than 90 and less than 180 days | 6 | 6 | 0 |
| At 50 percent | 3 | 3 | 0 |
| Instalments overdue 180 days or more | 4 | 2 | 8 |
| At 100 percent | 4 | 2 | 8 |
| Limb (ii): total | 7 | 5 | 8 |
| Minimum provision | 7 | 6.4 | 8 |

In Case A the overdue limb sets the minimum. In Case B the 1 percent floor does. Case B and Case C hold the same 8 of overdue instalments, so ageing alone lifts the minimum from 6.4 to 8.

Suppose the microfinance loans classified as NPA in Case B have an outstanding balance of 24. The minimum provision of 6.4 equals 26.7 percent of that balance, even though the test is met.

**NBFC that is not an NBFC-MFI**

With total assets of 2,000, the 25 percent ceiling is 500. Microfinance loans of 480 leave headroom of 20.

## Checklist for reading the NBFC-MFI Directions, 2025

- Confirm the lender type: NBFC-MFI, other NBFC or bank lending to an NBFC-MFI.
- Confirm the NBFC-MFI's layer under scale based regulation.
- Recompute the 60 percent test net of intangibles, with channelised loans out of both sides.
- Look at the qualifying assets ratio across recent quarters, not just the latest.
- Test how planned growth outside microfinance would move the ratio.
- Check the capital adequacy ratio against 15 percent, and Tier 2 against 100 percent of Tier 1, as separate tests.
- Run both limbs of the aggregate loan provision test, and read the result against the balance on NPA loans.
- Confirm whether channelised loans carry credit risk, and that they are reported to Credit Information Companies.
- Confirm SRO membership and Board-approved geographic exposure limits.
- Read the Credit Facilities Directions, 2025 for the microfinance loan definition.
- Check the RBI website for later amendments before relying on any figure here.

## Sources

- [Reserve Bank of India (Non-Banking Financial Companies – Microfinance Institution) Directions, 2025](https://www.rbi.org.in/Scripts/BS_ViewMasDirections.aspx?id=12933), rbi.org.in, accessed 2026-11-06

Indicative only. Verify against your institution's policy.