Bihar MFI Bill 2026 Triggers up to 11% Share Price Drop in L&T Finance, Utkarsh Small Finance Bank and Fusion Finance

The Bihar Assembly passed the Micro Finance Institutions (MFI) (Regulation of Money Lending and Prevention of Coercive Actions) Bill 2026, prompting immediate share price declines of up to 11% for L&T Finance, Utkarsh Small Finance Bank and Fusion Finance. 

Impact of Bihar MFI Bill on L&T Finance, Utkarsh Small Finance Bank and Fusion Finance 

As of February 27, 2026, Fusion Finance fell over 11% made a low of ₹179.50 at 9:40 AM, while L&T Finance slipped 5% to ₹286 at 9:15 AM and Utkarsh Small Finance Bank slipped 7% made a low of ₹13.76 at 12:27 PM, respectively. The sharp moves reflect market sensitivity to the new regulatory requirements that affect loan disbursal and interest caps. 

Key Provisions of the Bihar MFI Bill 

The Bill mandates prior approval from the state finance department before any loan is issued, caps total interest at 100% of principal, limits a borrower’s exposure to 2 MFIs and requires registration with the state even if the lender holds an RBI licence. These measures aim to curb coercive recovery practices. 

Read More: Cabinet Approves ₹9,072 Crore Railway Multitracking Projects Across 4 States! 

Exposure of the Three Lenders to Bihar 

Utkarsh Small Finance Bank has the highest Bihar exposure at 46%, Fusion Finance follows with 19% and L&T Finance sources 17% of its microfinance book from the state. Satin Creditcare and Spandana Sphoorty each hold 13% exposure.  

Between 5% and 45% of MFI or MSME exposure in Bihar could see a rise in delinquencies, similar to the experience in Karnataka where 30+ days PAR more than tripled after a comparable bill. 

Market Reaction 

The immediate impact appears sentiment driven rather than balance sheet disruptive. The requirement for prior approval may slow credit growth and increase compliance costs, prompting investors to reassess growth assumptions for small finance banks with significant Bihar exposure. 

Conclusion 

The Bihar MFI Bill 2026 introduced tighter oversight for microfinance lenders, resulting in a 5% to 11% decline in the share prices of L&T Finance, Utkarsh Small Finance Bank and Fusion Finance. The new rules affect loan approval processes, interest caps and borrower exposure limits, with potential implications for credit growth and compliance expenses. 

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