India's microfinance sector recorded a significant turnaround as the portfolio outstanding rebounded to ₹331,000 crore as of March 2026. This recovery, marking a 3.2 per cent quarter-on-quarter (q-o-q) growth, represents the first major uptick after nearly eight quarters of contraction since March 2024.

The growth was largely supported by a surge in new loan originations and an increase in average ticket sizes across the industry. According to the latest MicroLend report by CRIF High Mark, this recovery was accompanied by a notable moderation in delinquency indicators.

The report highlighted that the PAR 31-180 bucket improved to 2 per cent by March 2026, down from 2.4 per cent in March 2024. While the portfolio outstanding declined by 13.2 per cent on a year-on-year (y-o-y) basis, the report attributed this partly to the reclassification of loans and a shift from microfinance to retail repositories. "Microfinance portfolio rebounds after eight quarters, rising 3.2 per cent q-o-q to ₹331K crore in Mar'26, supported by higher originations, larger ticket sizes and improvement in PAR 31-180," the report stated.

The data showed that while the number of active borrowers and loans continued to decline, the pace of this contraction eased. Active borrower counts fell by 3.2 per cent to 6.9 crore, a slower decline compared to the 5 to 6 per cent drops seen in previous quarters. Similarly, active loans moderated by 4.5 per cent to 10.7 crore as of March 2026. Disbursement activity provided a strong tailwind for the sector during the final quarter of the fiscal year.

The value of microfinance disbursements increased by 25.8 per cent q-o-q, reaching ₹77,555 crore in Q4FY26. In terms of volume, the industry saw 126.1 lakh loans disbursed, reflecting a 22.8 per cent increase over the preceding quarter. On the lender side, Non-Banking Financial Company-Microfinance Institutions (NBFC-MFIs) emerged as the primary growth drivers. Their share of the total portfolio outstanding rose from 38.9 per cent to 43.7 per cent y-o-y.

Conversely, the market share for banks saw a decline from 32.6 per cent to 26.4 per cent, while Small Finance Banks and other NBFCs maintained relatively stable shares at 16 per cent and 12-13 per cent, respectively."Early-stage (PAR 1-30, PAR 31-90) delinquency buckets dropped below 1 per cent, while PAR 91-180 declined sharply from 3.4 per cent in Mar'25 to 1.2 per cent in Mar'26--the best level in five quarters," the report noted.

Geographically, the recovery remained broad-based across India. Nine out of the top 10 states recorded QoQ growth in their portfolios, with Tamil Nadu being the only exception. Although some states continued to report delinquency levels above the national average, the overall trend pointed toward stabilisation.

The report also emphasised a shift in risk management, noting that approximately 95 per cent of portfolio exposure is now concentrated among borrowers with three or fewer lender associations. This trend reflects the impact of stricter guardrails and tightening underwriting standards adopted by lenders.

"Overall, the MicroLend report underscores that while the industry continues to recalibrate, microfinance lending in India is showing recovery, with improving asset quality, stronger origination momentum, and a shift towards higher-ticket loans," the report stated.

Published on May 8, 2026