Industry sustains growth momentum, while portfolio quality improves significantly
The Micro Finance Industry Network (MFIN) has released the 58th edition of its flagship publication, Micrometer, presenting data on India’s microfinance industry as of June 30, 2026.
The microfinance industry’s total portfolio stood at ₹3,28,708 crore, registering a 1.1% quarter-on-quarter growth in Q1 FY2026-27. On a year-on-year basis, however, the portfolio declined 6.9%. The industry disbursed ₹61,718 crore during the quarter, an 8.9% increase over Q1 of the previous financial year.
Portfolio quality continued to improve, with PAR 31-180 declining to 1.6% as of June 30, 2026, from 5.6% a year earlier and 2.1% in the previous quarter.
NBFC-MFIs accounted for the largest share of the industry portfolio at 44.3%, followed by banks at 25.3%. The portfolio of NBFC-MFIs grew 5.2% year-on-year, while NBFCs recorded 2.7% growth. Funding received by member NBFC-MFIs increased 91.4% year-on-year during the quarter.
The East & Northeast region remained the largest market, accounting for 36.6% of the sector’s portfolio, followed by the South. Bihar continued to lead among states, followed by Uttar Pradesh and Tamil Nadu, with the top 10 states accounting for around 83% of the total portfolio.
Dr. Alok Misra, CEO & Director, MFIN, said, “The industry has sustained the growth momentum seen in the last quarter, marking a turnaround after seven consecutive quarters of slowdown. Growth has been driven primarily by NBFC-MFIs and higher loan sizes, reflecting a degree of consolidation around existing borrowers. Along with the guardrails, this has contributed to the significant improvement in portfolio quality, as a larger share of lending is going to borrowers with an established credit history in the formal system. Portfolio health has also benefited from a better-than-anticipated monsoon. Other than Rajasthan, none of the top 10 states has seen a deterioration in the monsoon outlook since June, with several large microfinance markets experiencing normal or near-normal rainfall. This has supported local economic activity and, at present, a slowdown in demand does not appear to be a concern.
While the GLP has inched up, the increase would have been much higher but for the shifting of loans from microfinance bureau to retail bureaus. As the regulation is clear that all unsecured loans extended to households below annual household income of 3 lakh are microfinance, the issue has been taken up with the RBI. Relatedly, since reporting compliance is closely linked to the household income limits defined for microfinance households, these limits also merit review. Since the last revision in 2022, household incomes, wages and the general price level have increased materially, reducing the real value of the existing Rs 3 lakh threshold.”
