Page 14 - Banking Finance February 2026

RBI CORNER

companies in facilitating credit flow, RBI flags stress in microfinance, calls for close moni-
particularly to underserved segments.
He stressed that growth ambitions toring
must be balanced with prudent risk The Reserve Bank of India has cautioned that the performance of
management, ethical conduct and cus- microfinance loans needs to be monitored closely, even as overall asset
tomer-centric practices. The governor quality in the non-banking finance sector improved at the end of March 2025.
also underscored the importance of According to RBI data, asset quality at NBFC-microfinance institutions (MFIs)
prompt grievance redressal to maintain deteriorated, reflecting underlying stress and recovery challenges in the
confidence and ensure the orderly and segment.
sustainable development of the sector.
The gross non-performing asset (GNPA) ratio for NBFC-MFIs rose sharply to
4.1 per cent at end-March 2025 from 2.0 per cent a year earlier, while the
RBI proposes three-year net NPA ratio increased to 1.2 per cent from 0.6 per cent over the same
cooling-off for co-opera- period. The RBI noted that GNPA and NNPA ratios for the broader NBFC
sector remained unchanged at end-September 2025 compared with March
tive bank directors after levels.
10-year tenure The central bank said NBFCs should continue diversifying funding sources

The Reserve Bank of India (RBI) has and balance growth with sound and fair lending practices to support inclu-
proposed a mandatory three-year cool- sive growth and financial stability. It also stressed vigilance against emerg-
ing-off period for directors of co-opera- ing technological and cyber risks and the need for timely grievance redressal.
tive banks who have completed a con-
While regulatory changes introduced in 2022 supported sustainable growth
tinuous tenure of 10 years on the in microfinance by removing interest rate caps and standardising rules, the
board. Under the draft circular, such RBI said regulated entities must now closely track stress build-up in the seg-
directors can be reappointed to the ment.
same bank's board only after complet-
ing the cooling-off period, during which
they cannot be associated with the Finance Ministry invites patory governance, and noted that sev-
bank in any capacity other than as a eral public suggestions in previous years
regular member or customer. How- public suggestions for were incorporated into the final budget.
ever, they may serve as a director on Union Budget 2026-27
the board of another co-operative The ministry highlighted that citizen
bank during this period. The Finance Ministry has invited sug- inputs can help shape policy priorities
gestions from citizens for the Union and support India's journey towards
The RBI clarified that continuous ten- Budget 2026-27, which is expected to becoming a global economic power-
ure will be calculated by aggregating
be presented on February 1, 2026. house grounded in inclusive develop-
time served on the boards of urban co-
Through a post on the MyGov plat- ment. By opening the consultation
operative banks as well as state and
form, the ministry said it aims to re- process well ahead of budget prepara-
central co-operative banks, including
flect public aspirations while promot- tion, the government aims to capture
interruptions of less than three years. ing inclusive growth and national diverse perspectives on taxation,
Breaks of three years or more will re- progress. Individuals from all walks of
set the tenure count. The proposal fol- spending priorities and structural re-
lows the Banking Regulation (Amend- life, including students, professionals, forms for the upcoming financial year.
ment) Act, which increased the maxi- homemakers and retirees, have been
encouraged to share their ideas.
mum continuous tenure of directors Commercial sector funding
from eight to 10 years. The regulator Suggestions can be submitted until Janu- remains robust in FY26:
noted instances where directors re- ary 16, 2026, by logging in to
signed briefly and returned to boards www.mygov.in. The ministry said the RBI bulletin
to bypass tenure limits, undermining initiative is part of the government's The total flow of financial resources to
governance norms. emphasis on "Jan Bhagidari", or partici- the commercial sector during FY2026

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