In June 2025, the RBI revised the qualifying-assets criterion for NBFC-MFIs, requiring qualifying assets to constitute at least 60% of total assets net of intangible assets. The change gives institutions more balance-sheet room outside qualifying microfinance assets, although each lender’s diversification strategy remains subject to its licence, risk appetite, capital and operational capability. A loan management system built around one product can become a practical constraint when the institution adds products with different repayment, collateral and servicing requirements.
The operational reality for a large share of Indian NBFCs and banks is that their systems were designed for one product line. But they are now being asked to carry several.
Quick Answer
A legacy LMS struggles with multi-product lending because it was architected around a single loan type, with product rules, interest calculations, and repayment logic hardcoded rather than configurable. Adding a new product like secured lending, MSME credit, or supply chain finance, usually means custom development rather than configuration. This slows down launches, fragments servicing data across systems, and makes portfolio-level visibility harder to maintain as the product mix grows.
What “Multi-Product” Actually Demands from an LMS
Multi-product lending is not just multiple loan types sitting on the same platform. It requires the LMS to handle different repayment structures (equated monthly installments, bullet repayments, seasonal schedules), collateral and security types, regulatory treatment, and collections logic, all within a single, coherent data model.
Most legacy LMS platforms were not designed with this flexibility in mind. They were built to service one product well, at a time when institutions ran narrower, more specialized loan books.
Why Legacy LMS Platforms Weren’t Built for This
Loan servicing technology often evolves through incremental extensions rather than a single replacement. Celent’s work on next-generation servicing describes the difficulty of modernizing rigid platforms and introducing newer capabilities into existing architectures. Multi-product readiness is affected when product logic, data structures and integrations cannot be changed without code or parallel systems.
A few structural reasons this happens:
- Product logic is coded, not configured. In many legacy systems, adding a new loan type means engineering work: new fields, new calculation logic, new reports, tested and released on the vendor’s or in-house team’s schedule rather than the business’s.
- Data models assume one product shape. Fields built for unsecured personal loans don’t naturally accommodate collateral tracking, invoice-linked disbursement, or revolving credit lines without significant rework.
- Reporting and compliance logic don’t scale across products. A report built for one loan type’s regulatory disclosure requirements often needs to be rebuilt for a different product with different disclosure rules.
- Integration debt compounds. Each new product bolted onto a legacy core tends to need its own point integrations with credit bureaus, payment rails, and collections tools, multiplying the maintenance burden with every addition.
The Regulatory Push Toward Multi-Product Portfolios in India
This is no longer just a technology preference. Regulation is actively pushing Indian lenders, particularly NBFC-MFIs (non-banking financial company microfinance institutions), toward diversified product books.
The RBI’s June 2025 circular revised the qualifying-assets requirement for NBFC-MFIs to 60% of total assets net of intangible assets. This creates additional room for non-qualifying assets, but the circular does not prescribe which products an institution should launch or state that diversification will improve asset quality. Product expansion still requires appropriate underwriting, servicing, capital, compliance and governance.
Legacy LMS vs. Configurable Multi-Product LMS
| Dimension | Legacy, single-product LMS | Configurable multi-product LMS |
| Adding a new loan type | Usually custom development; timeline varies by scope | Configuration where supported; complex changes may need development |
| Repayment structures | Hardcoded for one pattern (e.g., EMI only) | Supports multiple structures natively |
| Collateral/security tracking | Bolted on or handled outside the system | Built into the core data model |
| Portfolio-level exposure view | Fragmented across product-specific modules | Consolidated across products |
| Regulatory reporting | Often extended or rebuilt per product | Reusable controls with product-specific configuration |
| Collections logic | Often duplicated per product workaround | Centralized rules with product-specific treatment |
What to Look for When Evaluating LMS Readiness for Multi-Product Lending
Before assuming a legacy LMS can absorb a new product line, credit ops and technology teams should be able to answer:
- Can a new loan type be configured without a code release, or does it require engineering effort each time?
- Does the system support different repayment structures (EMI, bullet, seasonal, revolving) without custom builds?
- Is collateral and security data a native part of the loan record, not a workaround maintained elsewhere?
- Can the system produce a consolidated exposure view across all products for a single borrower or group?
- How long, in practice, has the last new product launch taken on this system, and where did the delays happen?
- Does collections and delinquency tracking work consistently across products, or does each product need its own process?
Bottom Line
A legacy LMS can service its original product reliably yet struggle when the institution introduces products with different schedules, collateral, charges and collections rules. Lenders should test multi-product readiness against actual configuration, migration, accounting, reporting and integration requirements. Configuration can shorten routine changes, but complex products may still require controlled development and testing.
Frequently Asked Questions (FAQs)
Age alone doesn’t make a system legacy. What matters is whether product rules, calculations, and workflows are hardcoded into the system rather than configurable, which is what makes adding new products slow and expensive regardless of how long the platform has been in production.
To a limited extent, through manual processes, spreadsheets, or point integrations, but these workarounds tend to fragment data and increase reconciliation effort with each additional product, which becomes harder to sustain as the product count grows.
It matters across the board. Regulatory changes like the 2025 revision to NBFC-MFI qualifying asset norms were specifically aimed at giving smaller, more concentrated lenders room to diversify, which makes LMS flexibility a practical constraint for institutions of many sizes, not just large diversified lenders.
