India's microfinance sector plays an important role in expanding access to credit for low-income households, small borrowers and underserved communities. However, the sector's long-term health depends on more than the growth of loan portfolios. Borrowers' ability to repay, portfolio quality, levels of indebtedness and lenders' ability to manage credit risks all influence the sector's stability.
The Microfinance Pulse report, published by SIDBI and Equifax, examines the health of the sector through data on portfolio outstanding, disbursements, delinquency and lending patterns. It reports an industry portfolio outstanding of ₹2.69 lakh crore across 7.15 crore active loans, alongside a decline in 30-plus-day delinquency to 1.89 per cent.
This article goes through the main findings of the report and what they say about microfinance sector trends in India.
What Are the Key Trends in India's Microfinance Sector?
The 28th edition describes an industry that has gone through consolidation and has adopted a more cautious approach to lending. The aggregate loan book is smaller than a year ago, the mix of lenders has changed, loan sizes are rising, and repayment indicators have improved.
1. Changes in Microfinance Lending Activity
Lenders have become more selective about whom they lend to and how much. The report gives two views that should be read together. In the 12 months ending June 2026, portfolio outstanding fell 12 per cent. Disbursements in April to June 2026 were ₹62,302 crore, up 17 per cent over the same quarter a year earlier, although they slipped from the preceding quarter. A single number can therefore give a misleading picture, and annual and quarterly changes should be read side by side.
2. The Growing Role of NBFC-MFIs
NBFC-MFIs are now the largest lender category. They held about 47 per cent of portfolio outstanding in June 2026, with a portfolio of ₹1.26 lakh crore, up 3 per cent year on year. By comparison, banks held ₹59,030 crore, down 37 per cent from a year earlier, and small finance banks held ₹35,804 crore. NBFC-MFIs accounted for ₹27,387 crore, or nearly 44 per cent, of disbursements in the quarter ended June 2026. With banks continuing to view the sector cautiously, the role of NBFC-MFIs in the sector's growth and sustainability has become critical.
3. Shift Towards Higher-Value Loans
The share of high value loans (₹75,000) in disbursements rose from 28 per cent in April to June 2025 to 41 per cent in April to June 2026. The average ticket size went up from ₹54,681 to ₹62,962 in the same period, and the share of loans below ₹50,000 continued to fall. Lenders are directing more capital to borrowers with an established credit history and a record of repayment, and borrowers are asking for larger amounts for household, livelihood and enterprise needs.
What Does MFI Portfolio Outstanding Tell Us?
MFI portfolio outstanding is the total value of loans that remain unpaid across microfinance lenders on a given date. It shows the scale of lending. It does not show profitability or the quality of the loans.
The 28th edition reports the following as of June 2026:
- Portfolio outstanding: ₹2.69 lakh crore.
- Active loans: 7.15 crore.
- Year-on-year contraction in portfolio: 12 per cent.
- Quarter-on-quarter contraction, March to June 2026: 3 per cent.
The loan book kept shrinking even though annual disbursements grew.
Why Has the Microfinance Portfolio Contracted?
The sector expanded quickly after the pandemic and then has entered a period of consolidation. In this period, lenders have become more cautious, reduced exposure to overleveraged borrowers and worked to control credit risk. Repayments, write-offs and tighter lending all reduce outstanding balances.
Portfolio Outstanding vs. Loan Disbursements
Disbursements are the loans given during a period. Portfolio outstanding is the balance still owed on a particular date. In April to June 2026, disbursements were ₹62,302 crore, up 17 per cent on a year earlier, while portfolio outstanding fell 12 per cent. The two can move in opposite directions because borrowers keep repaying older loans, and write-offs also remove loans from the book, while lenders issue new credit at a different pace.
What Does Microfinance Delinquency Reveal About Credit Risk?
Microfinance delinquency means overdue loan payments. It is tracked in days past due (DPD), which counts how long a payment has remained unpaid. In the report, the 30-plus-day measure covers loans 30 to 179 days past due, and the 90-plus-day measure covers loans 90 to 179 days past due. A higher number of days signals deeper stress.
Trends in 30–179 Days Past-Due Delinquency
Industry 30-plus-day delinquency fell from 6.08 per cent in June 2025 to 1.89 per cent in June 2026, a drop of 419 basis points. This suggests that repayment has improved. The report links the improvement to the clean-up of the portfolio, the resolution of legacy stressed accounts and more careful underwriting. The reported rate can also move with changes in the mix of the portfolio and with write-offs, so it should not be read as repayment behaviour alone.
Why Lower Delinquency Does Not Eliminate Credit Risk
Lenders still need to watch overdue loans, borrower indebtedness and the performance of older accounts. A lower reported rate is encouraging. It does not mean that every borrower is financially stable or that all legacy stress has been resolved. One example is borrowers with many lenders. Those with five or more lending relationships had 30-plus-day delinquency of 10.68 per cent in June 2026, against 3.22 per cent for borrowers with a single lender.
How Delinquency Differs Across Lenders
NBFC-MFIs reported the lowest 30-179 days delinquency among lender categories, at 1.67 per cent in June 2026. The report compares banks, small finance banks and other lenders on the same measure, and the differences between categories should be read for the same date and the same definition. They should not be taken to mean that one type of lender will do better in every market or period.
Conclusion
The 28th edition of the Microfinance Pulse shows a sector in a period of consolidation. Portfolio outstanding has contracted, NBFC-MFIs have become the largest lender category, loans are getting bigger and reported delinquency has fallen to 1.89 per cent. The fall in delinquency is a positive sign, but the shrinking loan book and the continuing credit risk mean that lenders must balance growth with responsible lending.
Read together, portfolio outstanding, disbursement trends and repayment indicators give a fuller picture of the microfinance sector in India than any one of them alone, and that is what the Microfinance Pulse is designed to provide.
Frequently Asked Questions
What is the Microfinance Pulse report?
The Microfinance Pulse is a periodic report published jointly by the Small Industries Development Bank of India (SIDBI) and Equifax. It presents data on India's microfinance industry, including portfolio outstanding, disbursements and delinquency.
What is MFI portfolio outstanding?
MFI portfolio outstanding is the total balance of loans that remain unpaid across microfinance institutions on a specified date. It shows the size of the loan book, but it does not show profitability or the quality of the loans.
What is microfinance delinquency?
Microfinance delinquency refers to loan payments that are overdue. It is commonly measured in days past due (DPD), for example loans that are overdue by 30 days or more.
What are the latest microfinance sector trends in India?
According to the 28th edition, with data as on 30 June 2026, the loan book has contracted and NBFC-MFIs hold the largest share of lending. Loans of higher value account for a larger share of disbursements, and delinquency of 30 days or more has fallen to 1.89 per cent.
Why is the Microfinance Pulse report important for lenders?
The report helps lenders to understand sector performance, repayment behaviour, differences between lender types and emerging credit risks.
Does falling microfinance delinquency mean that the sector has fully recovered?
No. Lower delinquency is a positive sign, but it does not show that the sector has fully recovered. Portfolio contraction, legacy stressed accounts and borrower indebtedness still need attention.
