Asset quality in the microfinance sector has improved sharply, with the delinquency rate in the over 30 days past due (DPD) category dropping to 2.3 per cent at the end of March 2026 — the lowest recorded in recent periods, showing consistent improvement across all lender categories.
The delinquency rate in the over 30 days past due (DPD) category was 6.6 per cent at the end of March 2025, the Equifax report said.
According to Equifax’s Microfinance Insights Report, the 30+ DPD delinquency rate dropped to 1.7 per cent for the NBFC sector as compared to 4.1 per cent.
Similarly, for NBFC-MFIs, the delinquency rate was down to 2.1 per cent as opposed to 6.9 per cent. For private banks, the delinquency rate stood at 2.8 per cent as against 6.9 per cent, and for small finance banks it was down to 2.5 per cent as against 7.5 per cent at the end of March 2025.
This trend suggests that lenders are prioritising credit discipline over growth, particularly in a macro environment marked by cautious lending.
“The microfinance sector seems to be entering a phase of measured growth, where lenders are consciously balancing expansion with asset quality. The improvement in delinquency metrics indicates stronger credit frameworks and a more resilient borrower base. While disbursement trends reflect near-term caution, the underlying fundamentals of the sector remain robust,” said Subhankar Mishra, interim MD for Equifax Credit Information.
The microfinance sector saw a 10 per cent year-on-year decline in portfolio outstanding to Rs 3.38 trillion as of March 2026, as compared to Rs 3.75 trillion as on March 2025, reflecting a cyclical correction phase as lenders recalibrate exposure and focus on improving asset quality.
Also, the annual disbursement volumes of the industry dropped 21 per cent YoY to 4.21 crore accounts and declined by 7 per cent in value to nearly Rs 2.53 trillion. This divergence signals a shift from aggressive expansion to portfolio consolidation and risk-calibrated lending.
While the overall portfolio continues to expand, disbursements have moderated, and this indicates demand moderation and tighter credit filters. Total disbursements for January–March 2026 stood at Rs 79,622 crore, while active loans reached 10.42 crore, indicating sustained borrower engagement despite slower credit flow.
NBFC-MFIs continue to dominate the sector, contributing 47 per cent of disbursement share, reinforcing their leadership in last-mile credit delivery.
States such as Bihar, Tamil Nadu, and Uttar Pradesh continue to anchor the sector’s growth, though most regions reported a decline in disbursement volumes. Notably, Uttar Pradesh stood out with 2 per cent growth in disbursements, bucking the broader trend.
“The sector is moving away from a phase of aggressive, high-growth lending towards a more disciplined approach to credit expansion, where lenders are prioritising sustainability over scale. This transition seems evident in the reduced disbursement volumes alongside a steady portfolio base, indicating a clear pivot from volume-driven growth to a sharper focus on portfolio quality,” Mishra added.
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