April Special: A New Financial Year | Defining Financial Year by Purpose April marks the beginning of a new financial year a time that goes far beyond accounting resets and revised projections. It is a moment of strategic renewal, offering institutions the opportunity to reflect on past performance, recalibrate priorities, and set a clear direction for the year ahead. For financial institutions, particularly in a rapidly evolving economic and regulatory landscape, this transition is both symbolic and deeply practical. The close of a financial year often brings valuable lessons. Market fluctuations, regulatory developments, and shifting customer expectations continuously reshape the operating environment. As we step into the new year, the ability to learn from these experiences and translate them into stronger frameworks becomes critical. Institutions must not only review what worked, but also identify gaps in governance, risk management, and customer engagement. This new financial year calls for a sharper focus on sustainable growth. Expansion, while important, must be balanced with prudence and responsibility. Strengthening risk management practices, enhancing internal controls, and ensuring transparency in operations are no longer optional they are essential foundations for long-term success. Growth that is not supported by robust systems and ethical practices can quickly become a source of vulnerability. Equally important is the role of technology. As digital adoption accelerates, financial institutions are increasingly relying on automation, data analytics, and AI-driven decision-making. While these tools offer efficiency and scale, they also introduce new dimensions of risk and accountability. The coming year must be about leveraging technology responsibly ensuring that innovation is aligned with fairness, explainability, and customer protection. At the heart of this transformation lies organisational culture. A new financial year is an ideal time to reinforce the values that guide everyday decisions. Culture is not defined by policies alone, but by how institutions respond to challenges, treat customers, and uphold June Special: A New Financial Year, A Renewed Financial Mindset integrity under pressure. Embedding accountability, transparency, and customer-centricity into daily operations will be key to building trust and credibility. Leadership plays a pivotal role in setting this tone. Boards and senior management must go beyond oversight and actively shape the organisation's direction. Clear communication, strong governance, and a commitment to ethical conduct must flow from the top and permeate every level of the institution. The "tone at the top" must translate into consistent actions across teams and functions. April also serves as a strategic checkpoint. It is an opportunity to ask fundamental questions: Are we aligned with our long-term vision? Are our processes resilient enough to withstand uncertainty? Are we creating value not just for the institution, but for customers and the broader financial ecosystem? As we embark on this new financial year, the focus should be on disciplined execution, thoughtful innovation, and responsible growth. The path ahead will undoubtedly bring challenges, but it also offers immense potential. Institutions that combine strategic clarity with strong governance and a values-driven culture will be best positioned to succeed. Warm regards, Dinesh Gupta Chief Editor- NBFC FinSight March 2026 © DSB Law Group NBFC | Let this financial year be defined not just by performance, but by purpose.

The Credit Guarantee Scheme for Microfinance Institutions-2.0 (CGSMFI-2.0), launched in March 2026, represents a significant step by the government toward strengthening the microfinance sector and deepening financial inclusion in India. Building on the earlier version of the scheme, CGSMFI-2.0 aims to enhance the flow of institutional credit to underserved and vulnerable segments by providing guarantee coverage to Member Lending Institutions (MLIs) that extend financial assistance to NBFC-MFIs and other Microfinance Institutions (MFIs). At its core, the scheme seeks to address one of the biggest challenges in microfinance limited access to affordable and adequate funding. Many microfinance institutions face constraints in raising funds from formal financial systems due to perceived high risks associated with lending to low-income borrowers. CGSMFI-2.0 mitigates this concern by offering a credit guarantee, thereby encouraging banks and financial institutions to increase their exposure to the microfinance sector without fear of substantial losses. A major objective of CGSMFI-2.0 is to expand financial inclusion. A large segment of India's population, particularly in rural and semi- urban areas, continues to rely on informal sources of credit. Through this scheme, funds are routed via MFIs, which have strong grassroots presence and last-mile connectivity. This ensures that small borrowers including women entrepreneurs, self-help groups, marginal farmers, and informal workers gain access to timely and affordable credit. Another important aspect of the scheme is its emphasis on supporting livelihood generation and economic empowerment. The loans extended under CGSMFI-2.0 are typically used for micro- enterprises, small businesses, agriculture, and allied activities. By facilitating such economic opportunities, the scheme contributes to job creation, poverty alleviation, and improved living standards. It also promotes entrepreneurship among marginalized communities, fostering self-reliance.

CGSMFI-2.0 also focuses on strengthening the resilience and sustainability of the microfinance ecosystem. By ensuring a steady and reliable flow of funds to NBFC-MFIs and MFIs, the scheme enhances their operational capacity and enables them to scale up their outreach. This is particularly important in the post-pandemic economic environment, where many microfinance institutions faced liquidity constraints and rising credit risks. A key highlight of the scheme is its risk-sharing mechanism, which reduces the burden on lending institutions. The guarantee coverage protects MLIs against a portion of potential defaults, thereby boosting their confidence to lend more aggressively to the sector. At the same time, the scheme promotes responsible lending practices, ensuring that credit is extended based on sound appraisal and monitoring systems. Furthermore, CGSMFI-2.0 aligns with the broader national objective of inclusive and sustainable economic growth. By integrating vulnerable populations into the formal financial system, the scheme helps reduce dependency on informal and often exploitative sources of credit. It also complements other government initiatives aimed at financial inclusion, digital payments, and rural development. In conclusion, the Credit Guarantee Scheme for Microfinance Institutions-2.0 (CGSMFI-2.0) is a forward-looking initiative designed to create a robust, inclusive, and risk-mitigated credit ecosystem. Through its focus on credit guarantee support, financial inclusion, livelihood promotion, and institutional strengthening, the scheme plays a crucial role in empowering small borrowers and driving grassroots economic development across the country. Overall Corpus Crux: ₹20,000 crore Total Guarantee Corpus | Valid Till 30 June 2026 OR Corpus Exhausted | ~36 lakh Borrowers Expected Beneficiaries.

India's latest Financial Stability Report (FSR) offers a compelling look into a credit ecosystem that is both resilient and undergoing rapid transformation. The report highlights how India's financial system led by well-capitalized banks and supported by steady economic growth continues to remain stable despite evolving domestic and global challenges. At the same time, it brings attention to emerging risks that could shape the future trajectory of credit in the country. One of the most notable developments is the strengthened position of the banking sector. Asset quality has improved significantly, with non-performing assets (NPAs) declining to some of the lowest levels seen in years. This reflects tighter credit appraisal mechanisms, improved recovery processes, and regulatory reforms implemented over the past decade. Banks today are better capitalized, with strong capital adequacy ratios that provide a cushion against potential economic shocks. This improved health enables them to continue supporting economic expansion through sustained lending. Credit growth remains robust and is a major driver of the current financial landscape. Retail lending, infrastructure financing, and services sector demand have contributed to a steady rise in overall credit. This expansion indicates growing financial inclusion and increased consumption, both of which are essential for economic momentum. However, the report also flags a key concern: credit growth has been outpacing deposit growth. This divergence could lead to liquidity pressures within the banking system, potentially pushing up interest rates and tightening financial conditions if not addressed. Another important trend highlighted in the report is the increasing share of unsecured retail loans. While such lending has boosted consumption and expanded access to credit, it also poses risks. A growing portion of loan defaults is now linked to unsecured segments, where borrowers often lack sufficient collateral. Additionally, instances of borrowers taking multiple loans across platforms have raised concerns about over-leveraging. The role of non-banking financial companies (NBFCs) and fintech firms has also expanded significantly. These entities have been instrumental in reaching underserved populations, including small businesses and first-time borrowers. Their use of digital platforms and alternative data has improved credit accessibility and efficiency. However, their rapid growth has introduced new vulnerabilities, particularly due to higher exposure to riskier loan segments. The interconnected nature of banks and NBFCs further amplifies systemic risks, making regulatory oversight increasingly important. At the same time, the report acknowledges external risks such as geopolitical tensions, global financial volatility, and technological disruptions. The rise of digital financial instruments and innovations, including fintech-driven lending and emerging forms of digital assets, presents both opportunities and challenges. Regulators are closely monitoring these developments to ensure they do not undermine financial stability.

Microfinance stocks have recently surged following the government's announcement of a ₹20,000 crore credit guarantee scheme aimed at revitalizing the sector. The move has been welcomed by investors and industry participants alike, as it directly addresses one of the biggest challenges faced by microfinance institutions (MFIs): access to funding. At the heart of this rally is the newly launched Credit Guarantee Scheme for Microfinance Institutions (CGSMFI 2.0). The scheme is designed to encourage banks and financial institutions to lend to MFIs by offering partial credit guarantees on loans. Essentially, the government absorbs a portion of the default risk, making lenders more comfortable extending credit to these institutions. The guarantee cover ranges between 70% and 80%, depending on the size of the MFI, with smaller institutions receiving higher protection. This structure is particularly significant because smaller MFIs have been the most affected by funding constraints in recent years. The immediate market reaction has been positive. Stocks of microfinance-focused NBFCs and small finance banks climbed as investors priced in improved liquidity conditions and stronger lending growth prospects. The scheme is expected to unlock fresh capital flows into the sector, which had been struggling despite improvements in asset quality. The microfinance sector plays a crucial role in India's financial inclusion story by providing small-ticket loans to low-income households and rural entrepreneurs. However, over the past two years, the sector has faced multiple headwinds, including rising non-performing assets (NPAs), tighter regulations, and a sharp decline in bank funding. This liquidity crunch had slowed down credit disbursement and impacted growth. The new scheme aims to reverse this trend by restoring lender confidence and ensuring that MFIs can continue extending credit to underserved segments of the population. Another key feature of the scheme is its focus on responsible lending. Interest rates on loans extended by banks to MFIs are capped, and institutions are required to pass on the benefit to borrowers by charging lower rates. This ensures that the ultimate beneficiaries small borrowers gain from the policy intervention. The scheme is also time-bound, running until June 2026 or until the ₹20,000 crore limit is fully utilized. This limited window is likely to accelerate lending activity in the near term, further boosting sentiment in microfinance stocks. However, the outlook is not without challenges. While the guarantee reduces risk, it does not eliminate it entirely. Banks are still expected to maintain strict underwriting standards and may prefer lending to well-rated, larger MFIs over smaller or weaker players. The sector continues to face structural issues such as borrower over-indebtedness and regional concentration risks. Investors should remain cautious and differentiate between fundamentally strong institutions and those still grappling with asset quality concerns.

CreditAccess Grameen has strengthened its funding base by securing a syndicated social loan facility from a group of international lenders, marking another significant step in its mission to expand financial inclusion in India. The deal reflects growing global investor interest in socially responsible financing and highlights the company's strong positioning within the microfinance sector. The syndicated structure of the loan brings together multiple lenders, allowing CreditAccess Grameen to diversify its funding sources while accessing competitive borrowing terms. Social loans, by design, are tied to developmental outcomes, and the funds raised will primarily be used to support income-generating activities among underserved and low-income communities. This aligns closely with the company's core objective of empowering women entrepreneurs and rural households through access to credit. The transaction comes at a time when microfinance institutions are increasingly looking to tap global capital markets to meet rising demand for small-ticket loans. With domestic liquidity conditions tightening in recent months, such international funding avenues provide a critical cushion. For CreditAccess Grameen, the facility not only enhances liquidity but also strengthens its ability to scale operations without putting pressure on its balance sheet. Another key aspect of the deal is its sustainability-linked nature. Social loan facilities typically require borrowers to adhere to specific impact metrics, ensuring that the funds are deployed in a manner that delivers measurable social benefits. This adds a layer of accountability and transparency, which is particularly important for attracting global investors focused on environmental, social, and governance (ESG) criteria. The development also signals continued confidence in India's microfinance sector, which has shown resilience despite past challenges such as asset quality pressures and regulatory tightening. Improved repayment trends and stronger risk management practices have helped restore lender confidence, enabling institutions like CreditAccess Grameen to access larger pools of capital. Looking ahead, the additional funding is expected to support the company's growth strategy, including expanding its geographic footprint, increasing borrower outreach, and enhancing digital capabilities. By leveraging this capital effectively, CreditAccess Grameen can further deepen its presence in rural and semi-urban markets where access to formal credit remains limited. Overall, the syndicated social loan facility underscores a broader shift in the financial ecosystem, where profitability and social impact are increasingly intertwined. For CreditAccess Grameen, it not only reinforces its leadership in the microfinance space but also positions the company to play a larger role in driving inclusive economic growth.

Mufin Green Finance has secured ₹324 crore in fresh funding, marking a significant step forward in its strategy to expand its electric vehicle (EV) financing business. The capital infusion comes at a time when India's EV ecosystem is witnessing rapid growth, driven by policy support, rising fuel costs, and increasing environmental awareness. The newly raised funds will primarily be deployed to scale Mufin's lending portfolio, particularly in financing electric two-wheelers, three-wheelers, and commercial EVs. These segments have emerged as key drivers of EV adoption in India, especially in last-mile mobility and logistics. By strengthening its lending capacity, Mufin aims to support a broader base of customers, including small fleet operators, individual drivers, and micro-entrepreneurs transitioning to electric mobility. Mufin Green Finance has been positioning itself as a specialized financier in the EV space, focusing on providing tailored loan products that cater to the unique needs of this emerging segment. Unlike traditional vehicle financing, EV lending requires a deeper understanding of evolving technologies, resale values, and ecosystem risks. The company's targeted approach has allowed it to build expertise and gain a competitive edge in a niche but fast-expanding market. The funding round also highlights growing investor confidence in green financing and sustainable business models. As the global focus on climate change intensifies, financial institutions are increasingly directing capital toward environmentally responsible sectors. EV financing, in particular, is seen as a high-impact area, as it directly contributes to reducing carbon emissions and promoting cleaner transportation. In India, the push toward electrification has been supported by government initiatives such as subsidies, tax incentives, and infrastructure development programs. However, access to affordable financing remains a critical enabler for wider adoption. Many potential buyers, especially in the commercial segment, rely heavily on credit to make the switch to electric vehicles. By expanding its financing capabilities, Mufin is helping bridge this gap and accelerate the transition. The company is also expected to invest in technology and data analytics to enhance credit assessment and risk management. Given the relatively nascent nature of the EV market, lenders must navigate uncertainties related to battery life, asset valuation, and borrower profiles. Leveraging data-driven insights will be crucial in maintaining asset quality while scaling operations. Looking ahead, the fresh capital positions Mufin Green Finance to deepen its presence in key markets and build strategic partnerships with EV manufacturers, dealers, and fleet operators. This integrated approach can help create a more robust financing ecosystem, enabling faster and more efficient adoption of electric mobility solutions. Overall, the ₹324 crore fundraise underscores the growing convergence of finance and sustainability. For Mufin Green Finance, it represents not just an opportunity to expand its business, but also a chance to play a pivotal role in India's clean energy transition.