Microfinance Industry Portfolios Decline 9% in April Amid Private Banks' Caution
Microfinance Industry's Outstanding Portfolio Declines 9% in Year to April 2026
The microfinance industry's outstanding portfolio declined by 9 per cent in the year to April 2026, according to a credit information company. This decline is attributed to heightened caution among private banks, which has led to a moderation in lending activities.
The report by Equifax highlights a positive trend in asset quality for the industry, with assets unpaid for over 30 days declining to 2.5 per cent in April 2026 from 6.4 per cent in the year-ago period. This indicates a significant improvement in loan repayment rates.
The overall portfolio declined to Rs 3.34 lakh crore in April, a 9 per cent decrease from the previous year. The number of active loans also moderated sharply, decreasing by 21 per cent to 10.28 crore. This suggests that lenders are preferring to lend larger amounts, rather than increasing the number of loans.
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In contrast, non-bank lenders (NBFC-MFIs) showed a better asset-quality trend, with their market share growing to 43 per cent from 39 per cent in the year-ago period. They also witnessed industry-beating performance on loan outstandings, which were down by 4 per cent in the period.
| Market Share | April 2026 | Year-Ago Period |
|---|---|---|
| NBFC-MFIs | 43% | 39% |
| NBFCs | 14% | 12% |
| Small Finance Banks | 15% | 15% |
| Private Banks | 25% | 32% |
The market share of NBFCs grew to 14 per cent from 12 per cent in the year-ago period, while small finance banks maintained their 15 per cent market share. In contrast, private banks seemed cautious about the business, with their market share declining to 25 per cent from 32 per cent a year ago.
From a geographic reach perspective, the data show that 57 per cent of the overall portfolio outstanding is concentrated in the country's top five states. The states of Bihar, Uttar Pradesh, Rajasthan, and Jharkhand witnessed a positive year-on-year growth in disbursements.
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Investor Takeaway
Investors should monitor the microfinance industry's asset quality and loan outstandings for potential opportunities.
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