Microfinance portfolio declines 16.5% in Q2 FY26, asset quality improves

India’s microfinance portfolio continued to contract in the September quarter, although asset quality showed signs of recovery, according to Crif High Mark. | Photo credit: Shashi Shekhar Kashyap/The Hindu

The gross microloan loan book fell 16.5 per cent to Rs 3.45 lakh crore as on September 30, 2025, compared to Rs 4.14 lakh crore in the year-ago period, and was 3.8 per cent lower than Rs 3.59 lakh crore in the June quarter, a credit information company’s report said.

The number of active loans to borrowers at the bottom of the pyramid fell 19.3 percent year-on-year and 6.3 percent quarter-on-quarter to Rs 12.4 crore as of September, Crif High Mark said.

However, the amount disbursed in the July-September period rose to Rs 60,900 crore, up 6.5 per cent from Rs 57,168 crore in the quarter-ago period.

Larger loans are increasing

Loans in the Rs 50,000-1 lakh segment accounted for the majority of disbursements, while loans above Rs 1 lakh doubled their share year-on-year to 15 percent, largely thanks to banks and NBFCs.

On the asset quality front, issues on this front have led lenders to become cautious in recent quarters. There was an improvement, the report said.

It can be noted that the industry has taken a slew of measures, including limiting the number of entities that can lend to a borrower.

Borrowers’ exposure to up to three lenders increased to 91.2 percent in September 2025 from 83.1 percent in the year-ago period, adding that this reflects compliance with the guardrail cap.

The unpaid dues for up to 30 days have reduced to 1.41 per cent from 1.56 per cent in the quarter ago and 2.12 per cent in the year-ago period, while the unpaid dues between 31 and 90 days have declined to 1.84 per cent from 2.40 per cent and 2.45 per cent respectively, the report said.

“The microfinance sector continues to demonstrate its resilience, with lenders demonstrating prudence in selecting customers and underwriting loans. The steady rise in ticket sizes and increased lending to sophisticated borrowers reflect a maturing credit ecosystem that balances growth with sustainability,” said Sachin Seth, chairman of the company.

Published on November 5, 2025