BREAKING
Muthoot Microfin raises IT spending 40% following AI cyber threat alert
The microfinance lender is expanding digital defence budgets after central agencies warned financial firms of AI-driven payment system attacks.
Muthoot Microfin Ltd has increased its information technology spending by 40 per cent for the current financial year to reinforce cybersecurity systems against artificial intelligence-assisted cyberattacks targeting Indian financial institutions.
The capital deployment follows a critical-severity advisory issued on 4 November by the Indian Computer Emergency Response Team (CERT-In) alongside the Indian Cyber Crime Coordination Centre (I4C). The warning alerted banks, non-banking financial companies and microfinance lenders to an active threat actor named 'CRAFTY FALCON'. CERT-In reported that the group uses AI tools to scan and breach internet-facing application programming interfaces (APIs), executing unauthorised fund transfers at machine speed.
Muthoot Microfin managing director and chief executive Sadaf Sayeed said the lender has put significant capital into application security and intrusion prevention systems. The company operates a proprietary application infrastructure hosted on a private cloud, serving 2.2 million active digital app users out of its total customer base of 3.2 million.
Threat response and IT budget deployment
While CERT-In noted that several financial institutions suffered repeat intrusions even after applying standard remediation measures, Muthoot Microfin has not disclosed the exact monetary sum represented by the 40 per cent spending increase. The company confirmed that its in-house tech architecture uses multiple security layers to protect client data and disbursement channels.
The technology expansion arrives alongside a period of operational growth for the lender. Muthoot Microfin reported a 22 per cent year-on-year growth in assets under management (AUM) for the July-September quarter, reaching Rs 15,322 crore and exceeding its projected guidance of 18 per cent to 20 per cent.
| Operational Metric | Q2 FY27 Value | Previous Year Period | Growth / Change |
|---|---|---|---|
| Assets Under Management | Rs 15,322 crore | Not disclosed | 22% YoY |
| Quarterly Disbursements | Rs 2,900 crore | Not disclosed | 27% YoY |
| Net Profit | Rs 110.8 crore | ~Rs 30 crore | 269% YoY |
| Gross NPA | 3.38% | 3.70% | -32 bps |
| Cost of Funds | 9.93% | 10.13% | -20 bps |
Financial performance and asset quality
Net profit for the July-September quarter rose to Rs 110.8 crore from around Rs 30 crore in the same period last year. This brought the company's first-half profit for the financial year to Rs 192 crore. Sayeed confirmed that the company remains on track to hit its full-year profit target of Rs 425 crore to Rs 450 crore.
Asset quality metrics improved during the quarter, with gross non-performing assets (GNPA) dropping 32 basis points to 3.38 per cent. Credit costs stood at roughly 2.6 per cent, while overall collection efficiency reached 98.1 per cent. For repayments due in the zero-day bucket, collection efficiency stood at 99.8 per cent.
Fresh slippages accounted for approximately Rs 30 crore during the quarter, while recoveries from overdue accounts reached Rs 57 crore. Management expects GNPA to fall between 2.5 per cent and 2.75 per cent by the end of the financial year, with net NPA staying under 1 per cent.
Why it matters
For microfinance operators, scaling digital disbursements usually cuts operational overheads, but the rise of machine-speed API exploits alters the risk profile. Lenders serving rural and semi-urban markets are forced to spend a larger share of their operating margin on enterprise-grade cybersecurity tools.
As Muthoot Microfin expands into individual loans and higher-value credit products, securing transaction flows becomes central to maintaining underwriting margins. Digital collections and app-based customer acquisition cannot scale if underlying payment integration pipelines remain vulnerable to automated exploit scripts.
Portfolio shift and funding structure
Muthoot Microfin is gradually moving away from sole reliance on joint liability group (JLG) lending. Traditional JLG models now account for 69 per cent of the overall loan book, while non-JLG credit products make up the remaining 31 per cent.
The lender's individual loan book has grown to Rs 4,163 crore, with monthly disbursements averaging Rs 450 crore. Sayeed noted that individual loans carry an average interest rate of 24.5 per cent, yielding a standalone return on assets of about 8 per cent with an NPA rate of 0.02 per cent.
During the quarter, the firm also disbursed Rs 463 crore in gold loans and Rs 82 crore in loans against property, while introducing consumer durable financing to capture festive demand.
On the liability side, Muthoot Microfin saw its cost of funds drop below 10 per cent for the first time, easing to 9.93 per cent from 10.13 per cent. Incremental funding costs fell by 10 basis points in the quarter, supported by priority-sector lending certificates (PSLCs) accessed at rates of 8 per cent or lower.
What happens next
The company maintains an AUM target of Rs 17,000 crore by the end of the current financial year and plans to scale total assets to Rs 30,000 crore by 2030.
With a capital adequacy ratio of 25.5 per cent, liquidity reserves of Rs 1,700 crore and sanctioned borrowing lines of roughly Rs 4,000 crore, Sayeed stated that the company has no immediate plans to dilute equity.