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What is the story about?
India’s microfinance industry is entering a phase of measured consolidation, driven by tighter underwriting norms, improved asset quality, and a strategic shift toward higher ticket-size loans, according to the latest edition of MicroLend – December 2025 (Q3 FY26), released by CRIF High Mark, a leading credit bureau.
The report shows that India’s microfinance Gross Loan Portfolio (GLP) stood at ₹3.21 lakh crore as of December 2025, supporting 11.2 crore active loans.
On a year-on-year basis, GLP moderated by 18%, while active loans declined 23%, reflecting an industry-wide recalibration of risk.
Despite this moderation, disbursement trends indicate recovery in credit flow. Total loans disbursed in Q3 FY26 rose 9.2% quarter-on-quarter to ₹61,716 crore, with volumes increasing 6.8% to 1.03 crore loans.
The average ticket size grew 15.7% year-on-year to ₹60,200, highlighting a rising demand for larger loans.
Portfolio consolidation and lender dynamics
The contraction in active loans outpaced overall portfolio moderation, signaling consolidation toward higher-value loans. Non-banking financial company microfinance institutions (NBFC-MFIs) strengthened their leadership, accounting for 41.6% of the outstanding portfolio.
Banks saw the steepest decline, with GLP down 33.2% year-on-year and 21% quarter-on-quarter, while portfolios of NBFC-MFIs, NBFCs, and Small Finance Banks remained broadly stable sequentially.
NBFC-MFIs also expanded their share in disbursements, rising to 45.1% in Q3 FY26 from 37.5% a year earlier.
Shift toward higher ticket sizes
The origination mix favored larger loans. The ₹50,000–₹80,000 segment became the largest contributor, accounting for 42.8% of originations in Q3 FY26, up from 36.8% a year earlier.
Loans in the ₹80,000–₹1 lakh bracket also grew their share from 10.8% to 17.9%. Loans above ₹50,000 now drive value growth across most major states.
Asset quality and collections
Asset quality improved across early and mid-delinquency categories. PAR 1–30 declined from 1.8% in December 2024 to 1.0% in December 2025, while PAR 31–90 fell from 3.1% to 1.4%. PAR 1–180 reduced from 8.2% to 4.4% year-on-year, reflecting enhanced collections and risk management.
PAR 180+ (including write-offs) rose from 7.1% to 17.3%, indicating active portfolio clean-up. Collection efficiency, measured through Net Forward Flow, improved across 31–180 days-past-due segments since October 2025.
Borrower leverage and risk containment
Risk remains largely contained within lower-leverage segments. Borrowers with up to three lender associations account for approximately 94% of portfolio outstanding, and nearly 98% have total microfinance exposure of up to ₹2 lakh. Across top states, nearly 90% of borrowers have two lender associations, while customers with four or more associations continue to decline.
Regional trends
The top 10 states represent 82.2% of India’s microfinance GLP, with Bihar, Tamil Nadu, and Uttar Pradesh contributing 39% collectively. All major states reported sharper declines in active loans relative to GLP, reinforcing the trend toward higher ticket-size lending. PAR 31–180 improved in most states, with Odisha recording the strongest year-on-year reduction (9.7% to 2.8%) and Karnataka showing the steepest quarter-on-quarter improvement in Q3 FY26.
The report shows that India’s microfinance Gross Loan Portfolio (GLP) stood at ₹3.21 lakh crore as of December 2025, supporting 11.2 crore active loans.
On a year-on-year basis, GLP moderated by 18%, while active loans declined 23%, reflecting an industry-wide recalibration of risk.
Despite this moderation, disbursement trends indicate recovery in credit flow. Total loans disbursed in Q3 FY26 rose 9.2% quarter-on-quarter to ₹61,716 crore, with volumes increasing 6.8% to 1.03 crore loans.
The average ticket size grew 15.7% year-on-year to ₹60,200, highlighting a rising demand for larger loans.
Portfolio consolidation and lender dynamics
The contraction in active loans outpaced overall portfolio moderation, signaling consolidation toward higher-value loans. Non-banking financial company microfinance institutions (NBFC-MFIs) strengthened their leadership, accounting for 41.6% of the outstanding portfolio.
Banks saw the steepest decline, with GLP down 33.2% year-on-year and 21% quarter-on-quarter, while portfolios of NBFC-MFIs, NBFCs, and Small Finance Banks remained broadly stable sequentially.
NBFC-MFIs also expanded their share in disbursements, rising to 45.1% in Q3 FY26 from 37.5% a year earlier.
Shift toward higher ticket sizes
The origination mix favored larger loans. The ₹50,000–₹80,000 segment became the largest contributor, accounting for 42.8% of originations in Q3 FY26, up from 36.8% a year earlier.
Loans in the ₹80,000–₹1 lakh bracket also grew their share from 10.8% to 17.9%. Loans above ₹50,000 now drive value growth across most major states.
Asset quality and collections
Asset quality improved across early and mid-delinquency categories. PAR 1–30 declined from 1.8% in December 2024 to 1.0% in December 2025, while PAR 31–90 fell from 3.1% to 1.4%. PAR 1–180 reduced from 8.2% to 4.4% year-on-year, reflecting enhanced collections and risk management.
PAR 180+ (including write-offs) rose from 7.1% to 17.3%, indicating active portfolio clean-up. Collection efficiency, measured through Net Forward Flow, improved across 31–180 days-past-due segments since October 2025.
Borrower leverage and risk containment
Risk remains largely contained within lower-leverage segments. Borrowers with up to three lender associations account for approximately 94% of portfolio outstanding, and nearly 98% have total microfinance exposure of up to ₹2 lakh. Across top states, nearly 90% of borrowers have two lender associations, while customers with four or more associations continue to decline.
Regional trends
The top 10 states represent 82.2% of India’s microfinance GLP, with Bihar, Tamil Nadu, and Uttar Pradesh contributing 39% collectively. All major states reported sharper declines in active loans relative to GLP, reinforcing the trend toward higher ticket-size lending. PAR 31–180 improved in most states, with Odisha recording the strongest year-on-year reduction (9.7% to 2.8%) and Karnataka showing the steepest quarter-on-quarter improvement in Q3 FY26.
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