Muthoot Microfin awaits RBI response before raising ECB

Kolkata: Muthoot Microfin is delaying drawing down $25 million in external commercial borrowing (ECB) as it is waiting for clarity from the Reserve Bank of India (RBI) on the demand for lower swap rates and hedging cost concessions, said its chief executive Sadaf Sayeed.

The Kochi-based microfinance company received sanction letters from overseas investors in January and it has time till September to draw down the funds.

"We are waiting for RBI’s response on the demand for lower hedging cost and swap rates for non-public sector undertakings (PSUs). The hedging cost is too high now even after the rupee's appreciation from its record low,” Sayeed told ET.


In June, the central bank introduced a special concessional dollar-rupee swap window to lower hedging costs for PSUs raising ECBs to boost dollar inflows. This prompted private sector corporate borrowers to demand a similar concession.

Muthoot Microfin, the third largest non-banking financial company-microfinance institution in terms of gross loan portfolio, regularly taps the overseas debt market to diversify its resource base. It mobilised Rs 1,352 crore through ECB in 2025-26, about 15% of its total annual borrowing.

The microfinance subsidiary of Kerala’s Muthoot Pappachan Group expanded its gross loan portfolio by 18% year-on-year to Rs 14,457 crore at the end of June. Its quarterly loan disbursement surged about 50% year-on-year to Rs 2,645 crore, even as the seasonally soft quarter saw the overall microfinance sector’s gross loan portfolio shrink about 4% to Rs 3.26 lakh crore from Rs 3.39 lakh crore at March-end.

The company started gold loan disbursements under the referral and co-lending partnership with its parent, Muthoot Fincorp, during the quarter.

Muthoot Microfin also has Rs 1,485 crore of unused sanctioned term loans and non-convertible debentures which would provide it headroom to grow.

The lender’s average cost of funds fell 14 basis points in the first quarter of 2026-27 to 10.13% from 10.27% a year ago, helped by rating upgrades, Sayeed said.

A basis point is a hundredth of a percentage point.