India's microfinance asset quality improves as delinquency rate drops 61 pc: Report
New Delhi, May 27
India's microfinance sector witnessed a sharp improvement in asset quality, with the 30+ days past due delinquency rate declining by 60 per cent, a report said on Wednesday.
A report by Equifax showed that the 30+ days past due (DPD) delinquency rate stood at 2.5 per cent in April from 6.4 per cent in April 2025.
The improvement was observed across lender categories, reflecting stronger underwriting practices, tighter credit monitoring and a sector-wide emphasis on sustainable lending, it said.
"The latest trends suggest that the microfinance sector is undergoing a structural transition toward more disciplined and sustainable growth. Lenders are increasingly balancing growth ambitions with portfolio quality and long-term resilience," said Head of strategy and Interim MD for Equifax Credit Information.
The report added that improvement in delinquency levels points to stronger credit frameworks and a more calibrated risk environment across the ecosystem.
At the same time, the industry's total portfolio outstanding stood at Rs 3.34 lakh crore as of April 2026, a 9 per cent year-on-year decline, while active loans moderated to 10.28 crore.
Moreover, disbursement activity remained measured during the period, with industry-wide disbursement volumes declining 18 per cent year-on-year and disbursement value falling 4 per cent between May 2025 and April 2026.
Among lender segments, NBFCs reported the lowest delinquency levels across all overdue buckets, reinforcing their focus on prudent underwriting and portfolio monitoring.
In addition, NBFCs and NBFC-MFIs witnessed a gradual increase in market share across both disbursements and portfolio outstanding during the year.
The top five states contributed 57 per cent of the industry's portfolio outstanding, underlining continued geographic concentration within the sector, according to the report.
Geographica, Bihar, Uttar Pradesh, Rajasthan and Jharkhand emerged as key growth markets, recording positive year-on-year growth in disbursements despite the broader moderation in lending activity.
— IANS
Reader Comments
Impressive 60% drop in delinquencies! As someone tracking Indian financial markets from abroad, this signals healthier rural economies. But the 9% portfolio decline needs deeper analysis—is reduced lending due to caution, or demand constraints in villages? 🇮🇳
Finally some good news for rural finance! The NBFCs doing better makes sense—they've learned from past mistakes. But 57% portfolio concentrated in 5 states shows the gap still exists elsewhere. Need more balanced growth across all regions. Sabka saath, sabka vikas! 🙏
This is what responsible lending looks like. As a banker, I've seen how reckless microfinance hurts the poorest. Lower delinquencies mean better recovery for lenders and less debt burden for borrowers. But let's not celebrate too early—one bad season could reverse this.
Interesting data point from India's microfinance sector. The structural shift toward sustainability sounds promising. However, the geographic concentration in Bihar, UP, Rajasthan, and Jharkhand suggests these states are driving growth despite national moderation. Worth watching how monsoon impacts these numbers.
Great improvement but I'm cautious. My family in rural Tamil Nadu still struggles with microfinance agents pushing loans. Yes, delinquencies are down, but is it because banks are stricter or because borrowers have no money to repay? Need more ground-level verification, not just data.
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