The report indicated that the improvement in asset quality was evident across various lender categories, showcasing stricter underwriting standards, enhanced credit monitoring, and a general move towards more cautious lending practices within the sector.
Concurrently, overall lending activity remained measured. The industry’s total portfolio outstanding reached ₹3.34 lakh crore in April 2026, reflecting a 9% decrease year-on-year, while the number of active loans decreased to 10.28 crore.
Disbursement trends also signaled a decrease in new lending. Industry-wide disbursement volumes fell by 18% year-on-year during the period from May 2025 to April 2026, while disbursement value decreased by 4% in the same timeframe.
The report noted that lenders are emphasizing portfolio quality over swift expansion in light of changing credit conditions in the microfinance sector.
“Recent trends indicate that the microfinance sector is experiencing a structural shift toward more disciplined and sustainable growth,” stated the head of strategy and interim managing director at Equifax. The executive further mentioned that lenders are balancing growth with long-term resilience and portfolio quality.
Among the various lender categories, non-banking financial companies (NBFCs) reported the lowest levels of delinquency across overdue segments. NBFCs and NBFC-MFIs also increased their share in both disbursements and portfolio outstanding throughout the year, according to the report.
The report noted a continued geographic concentration in the sector, with the top five states responsible for 57% of the industry’s portfolio outstanding. Bihar, Uttar Pradesh, Rajasthan, and Jharkhand emerged as key growth markets, demonstrating positive year-on-year growth in disbursements despite the general slowdown in lending activity.
The findings suggest that the microfinance industry is gradually transitioning towards a more balanced growth model that emphasizes credit quality, operational discipline, and sustainability, as reported.
