Banks are changing their approach to microfinance, with a growing preference for lending to institutions instead of handling loans to individual borrowers directly, according to the Economic Times report. The shift concerns who receives funding from banks, rather than a stated withdrawal from microfinance.

The report also indicates that NBFC-MFIs—non-banking finance companies specialising in microfinance—have received substantial debt funding from banks. This suggests that bank support for these institutions remains an important part of the story, even as the preference between direct and institution-level lending changes.

Alongside this trend, the report refers to microfinance loans being reclassified within retail portfolios. However, the supplied extract does not explain the accounting treatment, identify the banks involved or give figures showing how much lending has moved towards institutions.

The available information therefore points to a change in lending strategy, but does not establish its scale or pace. It also does not state why banks are making this choice, whether individual borrowers face different loan terms, or how access to microfinance might be affected.