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Explained — Bihar government's latest move sends shares of these MFIs tumbling over 10%Shares of Fusion Finance are down 10% have halved from its IPO price of ₹368, while those of Utkarsh Small Finance Bank are also trading well below their IPO price on Friday.By Gaurav Jawalkar   |  Hormaz Fatakia   February 27, 2026, 9:46:18 AM IST (Updated)2 Min ReadShares of Microfinance lending institutions, Utkarsh Small Finance Bank, Fusion Finance, and L&T Finance are down between 3% to 10% on Friday, February 27, after the Bihar government's latest move on such institutions.

According to a note from IIFL, the Bihar government has introduced a bill regulating MFIs and small lenders, which is on similar lines or even more stringent than the ordinance issued by the Karnataka Government in 2025. Entities regulated by the RBI are exempt, but not from provisions relating to prohibition of coercive recovery methods, borrower protection measures, and fair recovery practices.

Additionally, the bill introduced by the Bihar government mandates mandatory registration, prevents lending at usurious rates with total interest capped at 100% of principal, and it also caps the lender exposure at 2 MFIs per borrower.

Bihar has the largest exposure for the MFI industry with a 15% exposure, where 13% of the borrowers have an association with two or more lenders.

According to IIFL, Utkarsh Small Finance Bank has a 46% exposure to Bihar, Fusion Finance has a 19% exposure, L&T Finance told CNBC-TV18 that 17% of their MFI book comes from Bihar, while Satin Creditcare and Spandana Sphoorty have a 13% exposure each.

The brokerage also goes on to warn that 5% to 45% of the MFI / MSME exposure in Bihar is at a risk of seeing a sharp rise in delinquencies, similar to Karnataka, where the Portfolio At Risk (PAR) for 30-plus days, more than tripled within two quarters of the Karnataka MFI bill, given the borrower vulnerability.

"(An) event risk like this makes us structurally cautious on lenders with high MFI exposure, apart from structurally lower growth / profitability compared to the previous cycle," the IIFL note said.

Shares of Utkarsh Small Finance Bank are trading 3.1% lower at ₹14.35 and are trading well below their IPO price.

Shares of Fusion Finance are down 10% at ₹184.73, and has halved from its IPO price of ₹368.

Shares of L&T Finance are also trading 3.2% lower on Friday at ₹290.35.Continue ReadingFirst Published: Feb 27, 2026 9:43 AM ISTTagsBihar governmentFusion Micro FinanceL&T FinanceMFIshare market todaySpandana SphoortyUtkarsh Small Finance Bank