Muthoot Microfin increases IT expenditure by 40 per cent to strengthen cyber security

As cyber attacks driven by Artificial Intelligence (AI) are targeting financial institutions, Muthoot Microfin Limited has increased its expenditure on Information Technology (IT) by 40 per cent this financial year to strengthen cyber security and digital infrastructure. According to a statement given to Mint by the company's Managing Director and Chief Executive Sadaf Sayyed, the company has made significant investments in security systems to prevent data leakage and any kind of unauthorised access into application systems. The company's application system has been developed in-house and is hosted on a private cloud, incorporating multiple layers of security.

These concerns regarding cyber security follow warnings issued by the Indian Cyber Crime Coordination Centre (I4C) under the Ministry of Home Affairs and the Indian Computer Emergency Response Team (CERT-In) under the Ministry of Electronics and Information Technology. On 4 November, these organisations alerted banks, Non-Banking Financial Companies (NBFCs), and fintech companies about the rise in AI-assisted cyber attacks. CERT-In has identified an AI-assisted malicious actor named 'CRAFTY FALCON', which uses AI tools to find vulnerabilities and exploit payment and distribution systems. These attacks are being carried out at machine speed, where hackers use flaws in software and internet-facing systems to access payment application Programming Interfaces (APIs) and unauthorisedly transfer funds. The agency warned that some institutions have been targeted again despite having taken remedial measures.

Muthoot Microfin currently has approximately 32 lakh customers, of whom 22 lakh customers use the company's customer application. The company is focusing on increasing digital collections and plans to continue investing in technology and security systems. According to Sadaf Sayyed, changes are also being observed in rural consumption patterns, where families are spending more on nutrition and high-quality products such as milk and dairy. This increased spending could improve health and productivity, which may assist in income and repayment capacity.

Regarding financial results, the company's Assets Under Management (AUM) in the July-September quarter increased by 22 per cent annually to ₹ 15,322 crore, which is higher than the company's previous growth estimate of 18-20 per cent. Disbursements in this quarter increased by 27 per cent to ₹ 2,900 crore. Net profit increased from approximately ₹ 30 crore a year ago to ₹ 110.8 crore, bringing the first half-yearly profit to ₹ 192 crore. Asset quality has also improved, with Gross Non-Performing Assets (GNPA) decreasing by 32 basis points to 3.38%. Collection efficiency stood at 98.1% and zero-bucket collection efficiency was 99.8%. Sayyed expects GNPA to decrease to 2.5-2.75% and Net NPA to remain below 1%. The company is now expanding into other products in addition to its traditional Joint Liability Group (JLG) business, which currently accounts for 69% of the portfolio. The personal loan portfolio has grown to approximately ₹ 4,163 crore.

Muthoot Microfin is a microfinance lender that provides financial services in rural and underserved areas. The company has expanded its business through the use of technology and digital services.