Muthoot Microfin Limited has settled a penalty of ₹40.08 lakhs with the Regional Provident Fund Commissioner, Kochi, for delayed remittance of provident fund dues. The company received an order under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952, proposing levy of damages and interest on account of delayed PF contributions.

Penalty Details and Timeline

The order, dated January 6, 2026 and received by the company on January 9, 2026, covers the period from April 1, 2019 to March 31, 2024. The penalty amount and key details are outlined below:

COVID-19 Related Delays

The major portion of the demand relates to the national lockdown period in April 2020 during the COVID-19 pandemic. Despite total closure of offices and branches, Muthoot Microfin took a proactive, employee-centric approach by providing financial support through advance salaries to ensure workforce well-being during the crisis.

The company formally treated these advances as salary in February 2021 and promptly remitted the requisite Provident Fund contributions in March 2021. However, the EPFO treated this specific timeline, along with certain other minor administrative delays in other periods, as delayed remittances under the Act.

Regulatory Compliance and Settlement

In the interest of regulatory compliance and to avoid further litigation costs, the company has remitted the full penal damages amount. The settlement details are as follows:

• Amount Paid: ₹40.08 lakhs (Rupees Forty Lakhs Eight Thousand Only)
• Payment Status: Completed with Regional Provident Fund Commissioner, Kochi
• Proceedings Status: Closed upon payment
• Financial Impact: No material impact anticipated beyond the penalty amount

Company's Position

Muthoot Microfin has stated that it does not anticipate any material impact on its financial position, operations, or other activities arising from this matter, other than the penalty amount paid. The company has fulfilled all disclosure requirements under SEBI regulations and informed both BSE and NSE about the settlement.

The matter demonstrates the company's commitment to regulatory compliance while highlighting the challenges faced by financial institutions during the unprecedented COVID-19 lockdown period when employee welfare measures sometimes resulted in administrative complexities with regulatory timelines.

Muthoot Microfin CEO Sadaf Sayeed has declared that the microfinance sector has definitively moved past its most challenging period, with the company now positioned for sustained growth driven by improving asset quality and strengthening profitability metrics.

Strong Growth Trajectory Expected

Sayeed expects significant expansion in the company's lending portfolio, with assets under management projected to rise substantially in FY26. The growth momentum is supported by robust disbursement activity and improving market confidence.

Asset Quality Shows Remarkable Improvement

The turnaround is most evident in asset quality metrics, with the portfolio disbursed during the current financial year showing almost no stress. Collections across the broader book are improving significantly, providing confidence in earnings visibility and balance-sheet strength.

Profitability Metrics Strengthen

The operational improvements are translating into enhanced profitability across key metrics. Sayeed highlighted that the dramatic reduction in credit costs should drive substantial improvements in return ratios.

Strategic Shift Toward Bond Market Funding

Muthoot Microfin is strategically diversifying its funding profile by increasing reliance on bond markets. This shift supports the company's evolution toward longer-term lending products while improving asset-liability matching.

Sayeed explained that bonds have become crucial as the company expands beyond traditional microfinance into individual loans and loan-against-property products requiring longer-term funding. The three to five-year tenor of bonds and external commercial borrowings provides greater flexibility and improved asset-liability matching.

Market Recovery Signals Broader Sector Strength

The CEO's confidence reflects broader improvements across the microfinance sector, with steady recovery driven by improving collections, lower delinquencies, and measured growth resumption. The company sees growing opportunities to replace higher-cost bank loans with lower-cost bond funding, particularly as policy rates soften and retail participation in bond markets increases.