India’s Microfinance sector sees continued stabilisation, delinquencies decline to 2.8%: Equifax Insights report
Mumbai: India’s microfinance sector is demonstrating signs of sustained stabilisation, with the industry’s 30+ days past due (DPD) delinquency rate declining to 2.8%, improving credit quality and a more disciplined lending environment, according to the latest Microfinance Insights Report released by Equifax.
The total industry portfolio outstanding stood at Rs. 3,28,756 crore, registering a modest 2.48% month-on-month growth, even as the sector continues to consolidate following a period of elevated stress. On a year-on-year basis, however, the portfolio has contracted, indicating a shift toward more cautious and risk-aware lending practices.
Disbursement trends point to a deliberate slowdown. The industry recorded a 14% decline in disbursement value and a 26% drop in volume for the period February 2025 to January 2026 compared to the previous year. This suggests lenders are prioritising portfolio quality over aggressive growth.
Speaking on the findings, Aditya B. Chatterjee, Managing Director, Equifax, said: “The microfinance sector’s continued improvement in delinquency levels to 2.8% underscores a structural strengthening of credit discipline across the ecosystem. What we are witnessing is a more measured and data-driven approach to lending, where growth is being balanced with risk. The moderation in disbursements, alongside improving repayment behaviour, indicates that lenders are focusing on building resilient portfolios. This phase of consolidation is critical for enabling sustainable, long-term expansion of the sector.”
Across lender categories, NBFCs and NBFC-MFIs have emerged as the strongest performers on credit metrics, consistently reporting lower delinquency rates than the industry average. NBFCs, in particular, maintained the lowest delinquency levels across early, mid, and late-stage buckets.
The report also notes a steady decline in early-stage stress, with 30+ delinquencies dropping consistently across all lender segments, reinforcing the trend of systemic improvement. Meanwhile, the top five states account for 57% of the total portfolio, with states such as Uttar Pradesh showing relatively lower contraction in both portfolio size and disbursements.
State-level data indicates that while portfolio sizes have moderated across most regions, credit performance has improved consistently, with delinquency levels declining across the top 10 states. This points to a broad-based recovery rather than isolated improvements.
The Microfinance Pulse Report is based on data submitted by member institutions of Equifax and provides aggregated insights into borrower behaviour, portfolio trends and systemic risk across banks, small finance banks, NBFC-MFIs, NBFCs and not-for-profit MFIs.
