Chapter 4 - Section 4.5 - SubSection 4.5.2.iiDebt Funding

Debt funding forms a critical component of an MLI’s capital structure, complementing equity and retained earnings to finance loan portfolios. It typically comprises bank loans, bonds, securitised debt, and borrowings from financial institutions or NBFCs. MLIs rely on debt because it allows them to scale outreach rapidly without diluting ownership, given that equity is often limited. The cost, tenor, and structure of debt directly affect an MFI’s interest rate policy, liquidity management, and overall profitability. Prudent debt management ensures sustainable growth, enabling MFIs to extend microloans to underserved populations while maintaining financial stability and regulatory compliance. crores.

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Sources of funding based on types of instruments

Sources of funding based on Institution types

Sources of funding based on types of instruments

Sources of funding based on Institution types

Sources of funding based on types of instruments

Sources of funding based on Institution types

4.5.2.ii Debt Funding

Debt funding forms a critical component of an MLI’s capital structure, complementing equity and retained earnings to finance loan portfolios. It typically comprises bank loans, bonds, securitised debt, and borrowings from financial institutions or NBFCs. MLIs rely on debt because it allows them to scale outreach rapidly without diluting ownership, given that equity is often limited. The cost, tenor, and structure of debt directly affect an MFI’s interest rate policy, liquidity management, and overall profitability. Prudent debt management ensures sustainable growth, enabling MFIs to extend microloans to underserved populations while maintaining financial stability and regulatory compliance.

Debt funding for MFIs declined sharply from ₹1,30,096 crore in FY2023-24 to ₹85,877 crore in FY2024- 25, reflecting a reduction of around 34%. This drop is primarily due to tighter credit from banks and financial institutions, driven by cautious lending amid a rise in perceived riskiness of the sector. Regulatory constraints and prudential norms may have limited leverage, while lenders’ concerns over asset quality and macroeconomic risks further restrained funding. A breakdown of various sources of debt funding enjoyed by MLI during FY 2024-25 is given in Figure 4.5.6

Figure 4.5.6: Sources of funding based on types of instruments

Microlending Institutions (MLIs) rely on multiple borrowing sources to finance their lending operations and portfolio expansion. Banks are a key source, offering term loans, working capital, and overdrafts at competitive rates. Financial institutions and NBFCs offer structured loans or credit lines tailored to the growth needs of MFIs. Capital markets are increasingly used, with bonds and debentures enabling access to medium- and long-term funding. Securitisation of loan portfolios allows MFIs to convert receivables into immediate liquidity. Additionally, colending arrangements with banks help share risk while mobilising funds. These diverse sources ensure MLIs maintain liquidity, support outreach, and sustain operations efficiently. Figure 4.5.7 illustrates the source of funding for MLIs in FY2024-25, categorised by institution type.

Figure 4.5.7: Sources of funding based on Institution types

Figure 4.5.8 shows the trend of Borrowing Outstanding of MLIs over more than 10 years, along with legal-form and size-wise distribution for FY2024-25.

Figure 4.5.8: Outstanding Borrowings (₹ in Cr.)– Yearly Trend and MLI-Category-wise Break-up of 2025

Debt received by MLIs declined sharply from ₹1,05,306 crore in FY2023-24 to ₹58,046 crore in FY2024-25, representing a nearly 45% reduction. This significant fall can be attributed to multiple factors. Cautious lending by banks and financial institutions limited access to new debt. Higher borrowing costs made traditional loans less attractive, prompting MFIs to rely more heavily on alternative sources. Regulatory constraints and prudential norms further restricted leverage, while concerns over portfolio quality and potential NPAs made lenders wary. Additionally, MFIs have increasingly explored alternative financing options, such as BC and co-lending arrangements, thereby reducing their dependence on conventional debt sources. Figure 4.5.9 shows the borrowing received by MLIs based on legal form and size.

Figure 4.5.9: Fund Received during the year and MLI-Category-wise Break-up of 2025

Table 4.5.1 and Figure 4.5.10 below illustrate the debt received by MLIs from various source types.

Table 4.5.1: Source-wise and received by different entities during the year
Public Sector Banks Private Sector Banks SIDBI NABARD MUDRA NBFCs Other Fin. Ints. NCDs Any Others
NBFC-MFIs 13,010 21,140 1,442 2,514 110 4,645 3,538 2,831 6,495
NBFCs 40 424 - - - 792 10 308 356
Sec. 8 Coms 53 23 1 - - 10 3 1 -
Others 143 42 - - - 33 36 - 46
Total 13,246 21,629 1,443 2,514 110 5,480 3,587 3,140 6,897
Figure 4.5.10: Source-wise Share of Loans lent among Different Legal Forms of MLIs during 2024-25

Top Lenders to MLIs during 2024-25

The tables below list the major lenders (based on the information received for the top 10 lenders for each institution) that provide debt funds to MLIs.

Table 4.5.2 (a): List of banks that lent to MLIs as of March 2025 (Based on the Top 10 lenders out of the total)
S. No. Name of Lenders No. of MLIs
1 Assam Gramin Vikash Bank 1
2 AU SFB 5
3 Axis Bank Ltd. 9
4 Bandhan Bank Ltd. 9
5 Bangiya Gramin Vikash Bank 2
6 Bank of Baroda 18
7 Bank of India 21
8 Bank of Maharashtra 2
9 Canara Bank 8
10 Capital SFB 2
11 Chandrapur District Central Co-Operative Bank (CDCC) 1
12 City Union Bank 1
13 CSB Bank Ltd. 1
14 DBS Bank Ltd. 4
15 Deutsche Bank 1
16 Dhanlaxmi Bank Ltd. 2
17 Doha Bank 1
18 Federal Bank Ltd. 10
19 HDFC Bank 5
20 HSBC Bank Ltd. 1
21 IBL Finance Ltd. 6
22 ICICI Bank Ltd. 7
23 IDBI Bank 5
24 IDFC First Bank Ltd. 22
25 IndusInd Bank 41
26 Inclusion Finance Pvt. Ltd. 1
27 InCred Financial Services Ltd. 1
28 Indian Bank 5
29 Indian Overseas Bank 21
30 IndusInd Bank Ltd. 2
31 Jana SFB 3
32 Karnataka Bank 1
33 Karnataka Vikas Grameen Bank 1
34 Karur Vysya Bank 1
35 Kerala Gramin Bank 1
36 Kotak Mahindra Bank Ltd. 7
37 MUDRA 3
38 NABARD 1
39 Pudhuwai Bharathiyar Grama Bank 1
40 Punjab & Sindh Bank 1
41 Punjab National Bank 13
42 SBM Bank 1
43 Shivalik SFB 1
44 SIDBI 3
45 Standard Chartered Bank Ltd. 25
46 State Bank of India 26
47 State Bank of Mauritius 1
48 Suryodoy SFB 1
49 Tamil Nadu Grameen Bank 3
50 Tamilnad Mercantile Bank 3
51 The Assam Co-operative Apex Bank Ltd. 1
52 UCO Bank 6
53 Union Bank of India 11
54 Unity SFB 1
55 Utkarsh SFB 2
56 Yes Bank 6

Table 4.5.2 (b): List of other lenders who lent to MLIs as of March 2025 (Based on the Top 10 lenders out of the total)

S. No. Name of Lenders No. of MLIs
1 Aditya Birla Finance Ltd. 3
2 AFI Fund - IIV Mikrofinanzfonds 1
3 Agent for Impact (AFI) 1
4 Ajanta Pharma Ltd. 1
5 Alwar General Finance Co. Pvt. Ltd. 1
6 Ambit Finvest Pvt. Ltd. 1
7 Ambium Finserve Pvt. Ltd. 1
8 Annapurna Finance Pvt. Ltd. 2
9 Any Other (Saving mobilization) 1
10 Arohan Financial Services Ltd. 18
11 ASA International N.V. 3
12 Aspire & Innovative Advertising Ltd. 1
13 Assam Financial Corporation 1
14 Avanti Finance Pvt. Ltd. 5
15 Bajaj Finance Ltd. 3
16 BC Co-Operative Partners 1
17 BIFCO Leasing & Finance Pvt. Ltd. 1
18 Blacksoil Capital Pvt. Ltd. 3
19 BlueOrchard Finance Ltd. (BlueOrchard Microfinance Fund) 7
20 Carron Capital Advisors 1
21 Caspian Impact Investments Pvt. Ltd. 4
22 Clime Finance Pvt. Ltd. 2
23 Clix Capital Services Pvt. Ltd. 2
24 Concord 2
25 Credit Saison 3
26 Developing World Markets (DWM) 1
27 Electronica Finance Ltd. 3
28 Enabling Capital Ltd. 2
29 Enabling Capital Trust 2
30 Experimac Finance Pvt. Ltd. 1
31 Financial Institution 1
32 Finhive Capital Pvt. Ltd. 3
33 Finstars Capital Ltd. 10
34 FMO 2
35 Fuehrer Capital Pvt. Ltd. 1
36 FWWB 15
37 Global Access Fund 1
38 GOJO & Co. 5
39 Grip Invest Technologies Pvt. Ltd. 2
40 Group Funding 1
41 Grow Money Capital Pvt. Ltd. 2
42 Hindon Mercantile Ltd. 5
43 Hinduja Leyland Finance Ltd. 5
44 Homeshree 1
45 ICON Financial Services Pvt. Ltd. 1
46 IKF Finance Ltd. 4
47 Jackson Commercial Pvt. Ltd. 1
48 Jalan Chemical Industries Pvt. Ltd. 1
49 Jeevan Utthan Financial Services Pvt. Ltd. 2
50 JM Financial Ltd. 2
51 Kaleidofin Capital Pvt. Ltd. 5
52 Kashi Vishwanatha Vidya Samasthe 1
53 Kiara Micro Credit Pvt. Ltd. 2
54 Kisetsu Saison Finance (India) Pvt. Ltd. 3
55 Kissandhan Agri Financial Services Pvt. Ltd. 2
56 Kiyansh Finance Pvt. Ltd. 2
57 Kula Loans International 1
58 L&T Financial Services Ltd. 22
59 Loan from Directors 1
60 Loan from Directors & Relatives 1
61 Loan from Financial Institution 1
62 Loan from Members & Relatives 1
63 Loan from Promoters & Relatives 1
64 Loan from Shareholders (Unsecured) 1
65 Loans from Promoters 2
66 Manaveeyaa Development and Finance Pvt. Ltd. 15
67 Manba 1
68 MAS Financial Services Ltd. 20
69 Masala Investments Sarl (NCD cum Subdebt) 1
70 Members & Public 1
71 Microfinance Solidaire 1
72 Milap 2
73 MK Venture Capital Pvt. Ltd. 3
74 Moneywise Financial Services Ltd. 4
75 Moringaway 1
76 Muthoot Microfin Ltd. 3
77 N+1 Capital Ltd. 1
78 NABFINS Ltd. 31
79 Nabkisan Finance Ltd. 5
80 Nabsamruddhi Finance Ltd. 1
81 National Co-Op Development Corporation 1
82 National Scheduled Castes Finance and Development Corporation (NSFDC) 1
83 Navachetana Vividodesh Souharda Sahakari Niyamit 1
84 NCD Application 1
85 NCD issued to Promoters and Others 1
86 NDC 1
87 Nederlandse Financierings-Maatschappij voor Ontwikkelingslanden N.V. (FMO) 1
88 NEDFI 5
89 Neeva Swarnam Pvt. Ltd. 3
90 Nipha Finance Pvt. Ltd. 1
91 NKC Finance Pvt. Ltd. 2
92 Northern Arc Capital Ltd. 20
93 Nova Vyapar Pvt. Ltd. 1
94 Others 5
95 Oxyzo Financial Services Pvt. Ltd. 4
96 Pahal Financial Services Ltd. 1
97 Piramal Capital & Housing Finance Ltd. 3
98 Poonawalla Fincorp Ltd. 3
99 Private Finance 1
100 Project Amon SCB (ECB) 1
101 RAI Finance Ltd. 19
102 Real Touch Finance Ltd. 8
103 ResponsAbility 2
104 Retail Investor 1
105 Ricavi Finance Ltd. 3
106 Rockland Finstock Ltd. 2
107 Rotary Fund 1
108 Samanthah Finance Ltd. 2
109 Samunnati Financial Intermediation & Services Pvt. Ltd. 9
110 SAS Finserv Pvt. Ltd. 1
111 SAS Infotech (inter corporate loan) 1
112 Save Solutions Pvt. Ltd. 2
113 Saving & Deposit from Borrowers/Public 1
114 Share Bazar Financial Services Ltd. 1
115 Shine Star Build Cap Pvt. Ltd. 6
116 Shriram Finance Ltd. 15
117 SMC Finance (Moneywise Financial Services Pvt. Ltd.) 1
118 Subhsherse Tradelink Pvt. Ltd. 1
119 Sumitomo Mitsui Banking Corporation 1
120 Sundram 1
121 Symbiotic AAV SARL and MIS SARL 1
122 Symbiotics South Asia Pvt. Ltd. 2
123 Tamilnadu Industrial Investment Corporation Ltd (TIIC) Ltd. 1
124 Tarangini Commercial Enterprises Ltd. 2
125 Tata Capital Financial Services Pvt. Ltd. 4
126 Tipsons Consultancy Services Pvt. Ltd. 1
127 Triple Jump 4
128 UC Inclusive Credit Pvt. Ltd. (UCIC) 12
129 United States Development Finance Corporation (DFC) 1
130 Usha Financial Services Pvt. Ltd. 17
131 Utthejana Trading and Services Pvt. Ltd. 1
132 Vedika Credit Capital Ltd. 3
133 Venus India Asset-Finance Pvt. Ltd. 1
134 Vivriti Asset Management Pvt. Ltd. 17
135 Western Capital Advisors Pvt. Ltd. 12
136 Whole Planet Foundation 2
137 Yunus Social Business Fund Bengaluru 1