India’s microfinance industry is showing clear signs of stabilisation after several years of stress, with overall credit quality improving and lenders adopting a more disciplined, risk‑aware approach, according to the latest Microfinance Insights Report released by Equifax.
The report notes that the sector’s 30+ days past due (DPD) delinquency rate has fallen to 2.8%, marking a continued improvement and signalling stronger repayment behaviour across borrower groups. The total portfolio outstanding stood at ₹3.29 lakh crore, registering 2.48% month‑on‑month growth, even as year‑on‑year portfolio figures show a modest contraction.
Disbursements Slow as Lenders Prioritise Quality Over Growth
Disbursements have seen a notable decline, with the industry recording a 14% drop in value and a 26% fall in volume from February 2025 to January 2026 compared to the previous year. According to Equifax, this adjustment reflects a more calibrated lending strategy after a period of heightened stress.
“What we are witnessing is a more measured and data‑driven approach to lending, where growth is being balanced with risk,” said Aditya B. Chatterjee, Managing Director at Equifax. He added that the ongoing consolidation phase will be essential for “sustainable, long‑term expansion of the sector.”
“The microfinance sector’s improved delinquency levels underscore a structural strengthening of credit discipline across the ecosystem.”
— Aditya B. Chatterjee, Managing Director, Equifax
NBFCs and NBFC‑MFIs Lead on Credit Performance
The report highlights that NBFCs and NBFC‑MFIs continue to outperform the broader market, delivering lower delinquency levels across early, mid, and late‑stage buckets. Early‑stage stress has also declined consistently across lender categories, reinforcing the broader trend of systemic improvement.
State‑Level Trends Point to Broad-Based Recovery
The top five states account for 57% of the total microfinance portfolio, with states like Uttar Pradesh showing relatively lower contraction in portfolio size and disbursements. Importantly, the top 10 states have all recorded improvements in delinquency levels, indicating that the recovery is not limited to a few regions but is broadly distributed nationwide.
A Sector Moving Toward Sustainable Growth
The findings suggest that India’s microfinance sector is transitioning into a more resilient phase, supported by moderated lending, improved credit discipline, and strengthening borrower repayment behaviour.
The Microfinance Pulse Report draws on data submitted by Equifax member institutions, covering banks, small finance banks, NBFC‑MFIs, NBFCs, and not‑for‑profit MFIs, offering a comprehensive view of trends shaping the industry.