Microfinance Pulse

The 26th edition of the Microfinance Pulse Report captures a sector gradually stabilising after two years of stress. While the overall microfinance portfolio continues to contract, the pace of decline has slowed, supported by improving asset quality, disciplined underwriting, and the adoption of borrower level guardrails.

During Oct-Dec’2025, the industry recorded a 6% YoY rise in disbursement value, driven largely by NBFC MFIs and NBFCs, which saw disbursements grow by 27% and 26%, respectively. In contrast, private sector banks continued to scale back, resulting in a sharp 26% contraction in their disbursement share. This shift has consolidated NBFC MFIs’ position as sector leaders, now contributing about 44% of new sourcing.

As of December 2025, the industry supported 8.17 crore active loans and 5.5 crore unique borrowers, with a portfolio outstanding of ₹2.7 lakh crore. Despite ongoing portfolio rundown due to repayments, write offs, and tighter credit filters, lenders are prioritising quality over quantity, reflected in the meaningful decline in delinquency levels across most buckets.

Nevertheless, legacy stress remains visible with an increase in the 180+ DPD segment. State wise trends show significant portfolio moderation, with Karnataka seeing the sharpest contraction and Tamil Nadu maintaining the lowest delinquency among major states.

This edition also highlights emerging shifts in borrower behaviour, such as the transition from microfinance to retail loan products, alongside state level stress patterns, the role of aspirational districts, and the improving credit discipline driven by guardrails on leverage and multi lender exposure.