India, Dec. 30 -- The Reserve Bank of India (RBI) on Monday asked microfinance institutions to monitor the stress build-up on their books going forward. In the trend and progress in banking report for FY25, which comes amid a raft of measures impacting the industry in Karnataka and Tamil Nadu, the RBI also said disbursements were lower in southern States in the fiscal year. Noting that a slew of measures have been taken by the industry to improve its performance, the report said, "Going ahead, regulated entities need to monitor the build-up of stress in the segment.

Over the last few quarters, lenders have faced challenges on the MFI front, stemming from over-leverage among borrowers, which led to the industry coming together and adoptin...