Microfinance Pulse

Welcome to the 27th and the March 2026 edition of Microfinance Pulse.

While the microfinance sector witnessed stress and a portfolio consolidation over the period FY 2024-26 following a post Covid expansion phase (FY 2021-24), green shoots of a growth recovery are visible.

As of March 31, 2026, the sector serves approximately 5.5 crore unique live borrowers across 7.6 crore active loans, with a total portfolio outstanding (POS) of Rs. 2,77,053 crores.

Signs of a growth revival: While the industry witnessed a 17% YoY contraction in total portfolio outstanding between March 2025 and March 2026, the latest data indicates an inflection point. The sector portfolio recorded a 3% quarter-over-quarter growth between December 2025 and March 2026 for the first time in several quarters, signalling a resumption of growth momentum. Disbursements during the January-March 2026 (JFM'26) quarter reached Rs. 78,938 crores, the highest level reached since the JFM'23 quarter.

NBFC-MFIs Strengthen Market Share: NBFC-MFIs have solidified their position as the dominant players in the current landscape, accounting for nearly half of the industry's active loans, portfolio outstanding, and disbursements. They have captured close to 50% of origination volume and value, effectively leveraging the gap created by the reduced lending of banks to the sector.

Shift Toward Higher Ticket Sizes: A notable structural shift is underway in lending patterns, with a move away from traditional small-ticket loans toward larger disbursements. The share of loans below ₹50,000 continues to decline, while the proportion of high-value loans (above ₹75,000) has risen sharply from 26% in JFM'25 to 41% in JFM'26. The sustained increase in Average Ticket Size (ATS) indicates a strategic focus on existing borrowers with established credit histories and stronger repayment capacities.

Improvement in Asset Quality: The industry has witnessed a meaningful improvement in asset quality over the past five quarters. The 30+ days past due (DPD) delinquency rate declined significantly from 6.64% in March 2025 to 2.35% in March 2026, which partly may be due to write-offs by lenders. Among lender categories, NBFCs continue to report the lowest delinquency levels. Vintage analysis also indicates that loans originated in early and mid-2025 are performing better than earlier cohorts.

Geographic Stability and Moderation in Borrower Leverage: The improvement in asset quality is evident across key geographies. All top 10 microfinance states have reported decline in 30+ delinquency rates alongside portfolio contraction, with Tamil Nadu recording the lowest delinquency at 1.88%. Bihar remains the largest market, accounting for 16% of the overall portfolio.

Financial inclusion efforts continue to progress in the country's 112 Aspirational Districts, which now contribute 15% of the total industry portfolio (₹42,441 crore). Delinquency in these districts saw a sharp decline from 8.53% in March 2025 to 2.26% in March 2026, underscoring improving credit discipline.

The share of existing-to-credit (ETC) borrowers has steadily increased, reflecting a shift from new customer acquisition to deeper engagement with existing, higher-credit-quality borrowers.

A significant 48% overlap of MFI customers in retail loans (within a sample) highlights increasing borrower graduation into formal retail credit, with diversification into products like gold, housing, and unsecured business loans.