• Funding exposure: Muthoot Microfin said most of its loans are fixed-rate and about 35% of its borrowings are variable-rate, so the hike should have limited immediate impact. Rate transmission generally takes 3 to 6 months; the company said its cost of funds fell by 14 basis points in the last quarter and also decreased this quarter, supporting improving margins.
• Credit outlook: Industry credit growth was running at 18% to 19%, with Muthoot Microfin’s growth somewhat higher. Management expects strong disbursements in Quarter 3 and Quarter 4 and does not expect the rate hike to materially disrupt credit growth, given ample liquidity and festive-season demand.
• Inflation focus: Management viewed the hike positively, saying inflation particularly affects the economically weaker customers served by MFIs. It also called the decision timely and noted RBI’s inflation guidance rose from 5% to 5.2%, with the expectation raised by 20 basis points.
• Revolving credit rules: RBI Governor Sanjay Malhotra said the draft regulation clarifies that NBFCs’ revolving credit was not permitted, and addresses cases where technology is used to present it as term loans. RBI is reviewing comments and will decide after considering potential systemic and liquidity risks.