Microfinance Industry Sees Revival In Lending And Asset Quality: SIDBI-Equifax

New Delhi, Jun 17 (KNN) India's microfinance sector is showing early signs of recovery after multiple quarters of contraction, with improving asset quality, stronger credit discipline and a revival in lending activity, according to the 27th edition of the Microfinance Pulse Report released jointly by SIDBI and Equifax.
 
Microfinance Sector Shows Early Signs Of Recovery
 
The report noted that while the microfinance industry's portfolio outstanding declined 17 percent year-on-year by March 2026, the latest quarter signalled a turnaround, with portfolio growth of 3 percent over December 2025. 
 
Total portfolio outstanding stood at Rs 2.77 lakh crore, covering nearly 5.5 crore unique borrowers across 7.6 crore active loans. 
 
Disbursements Rebound As Lender Confidence Improves
 
Subhankar Mishra, Interim Managing Director of Equifax Credit Information Services, said the sector is entering a more stable growth phase, driven by improving portfolio quality, controlled borrower leverage and stronger disbursements. 
 
The January-March 2026 quarter saw disbursements rebound to Rs 78,938 crore, among the strongest recoveries after the prolonged slowdown. 
 
NBFC-MFIs retained their dominance, accounting for nearly half of total disbursement volume and value while leading in active loans, portfolio outstanding and fresh originations. 
 
Asset Quality Improves Across Lender Segments
 
Asset quality also improved significantly during the period. Industry-wide 30-plus days past due (DPD) delinquency declined to 2.35 percent in March 2026 from 6.64 percent a year earlier. 
 
The report noted improvements across lender categories and geographies, with NBFCs reporting the lowest delinquency levels among all lender segments.
 
Vintage analysis showed that loans originated during January-March 2025 and July-September 2025 performed better than earlier cohorts, reflecting stronger underwriting standards and improved borrower selection practices.
 
Lending Patterns Shift Towards Established Borrowers
 
The report highlighted a shift towards higher-value lending and borrowers with proven repayment records. Loans above Rs 75,000 rose to 41 percent of disbursements in January-March 2026 from 26 percent a year earlier, while smaller-ticket loans declined. 
 
The industry's average ticket size increased to Rs 62,945 from Rs 38,167 in FY22, reflecting a focus on borrowers with stronger credit profiles. Existing-to-Credit (ETC) borrowers made up nearly 80 percent of the borrower base in 2026, up from 67 percent in 2023, while the share of New-to-Credit (NTC) borrowers fell to 20 percent from 33 percent. 
 
States And Aspirational Districts Record Better Outcomes
 
Bihar remained the largest microfinance market with a 16 percent share of the total portfolio outstanding. Tamil Nadu recorded the lowest 30-plus DPD delinquency rate among major states at 1.88 percent, while high-risk markets also improved. 
 
Borrower leverage improved, with nearly 74 percent of borrowers linked to a single lender and fewer than 1 percent to four or more lenders, while West Bengal recorded the lowest multi-lender exposure among major states. 
 
Aspirational districts accounted for 15 percent of the industry's outstanding portfolio at Rs 42,441 crore, with 30-plus DPD delinquency falling sharply from 8.53 percent in March 2025 to 2.26 percent in March 2026, reflecting better asset quality and expanding formal credit access in underserved regions. 
 
(KNN Bureau)