MUMBAI: The microfinance industry continues to face downturn with the gross loan portfolio plunging by 18% to Rs 3.21 trillion in December, while active loans across 11.2 crore accounts declined by a steeper 23%, reflecting industry-wide risk recalibration and tighter underwriting norms.
According to the credit bureau Crif Highmark, despite portfolio moderation, disbursement trends indicate recovery in credit flow. Total loans disbursed during Q3 rose 9.2% on-quarter to Rs 61,716 crore, with volumes increasing 6.8% to 1.03 crore loans.
The average ticket size also continued its upward trajectory, rising 15.7% on-year from Rs 52,000 in Q3 FY25 to Rs 60,200 in Q3 FY26, underscoring growing demand for higher loan amounts and a structural shift in origination strategy.
The report notes that active loans are contracting more sharply than the overall portfolio value, indicating consolidation towards higher ticket-size loans and moderated borrower outreach.
MFIs continued to strengthen their leadership position, accounting for 41.6% of the outstanding portfolio as of December, while banks registered the steepest decline in fresh loans, down 33.2% on-year and 21% on-quarter. Meanwhile, the portfolios of MFIs, NBFCs and small finance banks remained broadly stable sequentially, despite on-year moderation.
On the origination front, MFIs expanded their market share significantly, with their contribution to disbursal value rising to 45.1% in from 37.5% in Q3FY25.
The origination mix has decisively shifted towards larger loans. The Rs 50,000–80,000 segment emerged as the largest contributor to originations, accounting for 42.8% in Q3, up from 36.8% a year earlier. The Rs 80,000–1,00,000 category rose from 10.8% to 17.9%. Loans above Rs 50,000 are now the primary drivers of value growth across most major states.
Asset quality improved across early and mid-delinquency buckets with 1-30 days delays improving from 1.8% in December 2024 to 1% in December 2025, while 31–90 coming down to from 3.1% to 1.4% and 1–180 declining from 8.2% to 4.4% on-year, reflecting the impact of guardrails, better collection performance, and tighter risk management.
Delays of over 180, including write-offs, rose from 7.1% to 17.3%, indicating active portfolio clean-up and write-off strategies. Collection efficiency improved across the 31–180 days-past-due buckets since October 2025.
Odisha saw the strongest reduction in delinquencies, from 9.7% in December 2024 to 2.8% in December 2025, while Karnataka witnessed the sharpest on-quarter improvement in Q3.
Borrowers with up to three lender associations account for around 94% of portfolio outstanding, and nearly 98% of the book is with customers having total microfinance exposure of up to Rs 2 lakh.
Across the top states, nearly 90% of borrowers have two lender associations, while the share of customers with four or more loans continues to decline. Delinquency levels has come down across exposure bands, with the sharpest improvement observed among borrowers with outstanding exposure above Rs 2 lakh.
The top 10 states account for 82.2% of the microfinance loan portfolio, with Bihar, Tamil Nadu and UP contributing 39% collectively. All the top states saw sharper declines in active loans, reinforcing the consolidation narrative and higher ticket sizes shift.