Mumbai: IDFC First Bank has received Rs 514.82 crore from the Credit Guarantee Fund for Micro Units (CGFMU) scheme against claims on its microfinance portfolio, the lender said in a stock exchange filing. The payout represents approximately 100% of the claim submitted by the bank and pertains to eligible microfinance loans sanctioned up to March 2025.
The receipt is expected to result in a full write-back of provisions already made by the bank against these defaults, directly boosting its bottom line. Since the bank had already set aside provisions for these MFI defaults in earlier quarters, the claim settlement will flow through as a reversal rather than fresh income — providing a one-time earnings tailwind.
Also read | FinMin to meet chiefs of PSU banks on Fri to review credit flow to agri, MSME sectors
Microfinance loans under the CGFMU scheme are extended to women entrepreneurs under a Joint Liability Group structure, where a group of borrowers collectively guarantee each other's loans. The scheme, backed by the government, provides credit guarantee cover to lenders against defaults in this segment.
The payout comes at a time when the microfinance industry has been grappling with elevated stress, rising delinquencies and overleveraging among borrowers — issues that have weighed on IDFC First Bank's asset quality and earnings in recent quarters.
Also read | HDFC Bank 'strongly' rejects Rs 45 cr payment route wrongdoing
Significantly, the bank said that approximately 97% of all new microfinance loan originations from January 2024 onwards are now covered under the CGFMU scheme — a strategic move that substantially de-risks its MFI portfolio going forward and limits the bank's credit loss exposure on fresh disbursals in this segment.
