The microfinance sector in India is experiencing a major surge in delinquencies, with portfolio in danger (PAR), or loans overdue for over 31 days, leaping by 163 per cent to Rs 43,075 crore within the fiscal 12 months ended March 2025, up from Rs 16,379 crore within the earlier 12 months. This rise in delinquencies displays the rising stress within the small borrower phase.
Considerably, the microfinance {industry}’s gross mortgage portfolio (GLP) fell to Rs 381,200 crore as of March 2025, marking a 13.9 per cent fall from Rs 442,700 crore a 12 months in the past.
Information from CRIF Excessive Mark, a credit score info bureau, exhibits that PAR within the 31-180 days overdue bucket has gone as much as 6.2 per cent throughout FY2025 as towards 2.1 per cent in the identical interval of final 12 months. PAR within the 180 days plus bucket has jumped from 1.6 per cent to five.1 per cent throughout the fiscal.
“PAR of 91-180 days and 180 plus days (together with write-offs) proceed to rise, significantly amongst banks and small finance banks, adopted by NBFC-MFIs, highlighting persistent challenges,” the company stated.
In line with CRIF Excessive Mark, higher-ticket loans above Rs one lakh have skilled an uptick in all delinquency buckets as their share in POS expands, highlighting the necessity for larger warning. Nonetheless, its delinquency is way decrease than the lower-ticket sizes, it stated.
Score agency CRISIL stated lending to over-leveraged debtors was the first issue that resulted in larger delinquencies for microfinance establishments within the final fiscal. Resultantly, the reported delinquencies in 90 plus DPD (days late) bucket are estimated to have greater than doubled to six.0 per cent as on March 31, 2025, from 2.4 per cent as on March 31, 2024.
Elevated borrowing from a number of sources has led to extreme debt burdens amongst debtors. Additional, exterior financial shocks and earnings uncertainties have impacted compensation capacities, monetary sector officers stated.
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The decline in microfinance gross mortgage portfolio displays a deliberate and calibrated shift by lenders to handle rising stress, particularly in mild of regulatory developments and evolving assortment practices.
Regardless of a seasonal rebound with disbursements rising 12.2 per cent Q-o-Q to Rs 71,500 crore, the year-on-year (Y-o-Y) figures stay subdued with a 38.0 per cent decline, signifying an industry-wide emphasis on high quality centered originations, in accordance with CRIF Excessive Mark, a credit score info bureau in India.
The gross mortgage portfolio declined by 2.6 per cent on a quarter-on-quarter foundation.
State-level knowledge revealed notable contractions in Tamil Nadu and Karnataka portfolios, influenced by anticipated ordinances and elevated regulatory intervention on assortment practices. Nonetheless, West Bengal emerged as a vivid spot with a 1.5 per cent Q-o-Q rise in portfolio measurement, CRIF Excessive Mark stated. General, the industry-wide development signifies consolidation, with a visual moderation in debtors sustaining a number of credit score relationships, it stated.
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The variety of energetic microfinance loans declined from 16.1 crore in March 2024 to 14.0 crore in March 2025. Debtors with 5 or extra lender associations now represent solely 4.9 per cent of the whole guide, down from 9.7 per cent a 12 months in the past, it stated.
“A key development highlighted within the report is the rising shift towards higher-ticket loans. Portfolio for loans above Rs 1 lakh grew by 38.5 per cent Y-o-Y, whereas these within the lower than Rs 30,000 phase have been at -8.0 per cent Q-o-Q and -35.9 per cent Y-o-Y, underlining a shift away from smaller-ticket lending sometimes related to this phase,” CRIF Excessive Mark stated.
Amid these shifts, the sector stays on a path of long-term sustainability. Whereas present indicators counsel cautious lending and protracted stress in elements of the portfolio, enchancment in early-stage efficiency and a gradual transfer in direction of higher-quality credit score segments are encouraging developments, CRIF Excessive Mark stated.
Ramkumar Gunasekaran, Director and Head of Gross sales at CRIF Excessive Mark, stated: “Lenders are making acutely aware selections that favour resilience, stability and long-term influence. The 12.2 per cent Q-o-Q rise in disbursements to Rs 71,580 crore this quarter, regardless of broader moderation, displays continued demand and a disciplined credit score strategy.”
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“As establishments recalibrate and regulatory frameworks evolve, we’re assured that the sector is laying the groundwork for stronger and extra inclusive progress. With continued focus and collaboration, we stay hopeful that the approaching quarters will carry renewed momentum,” he stated.
It stated NBFC-MFIs skilled a comparatively smaller decline in GLP this quarter, down 1.8 per cent QoQ, supported partially by elevated originations throughout the JFM interval. Nonetheless, on a YoY foundation, the contraction has been extra pronounced, with GLP dropping by 18.2 per cent, accompanied by a reasonable discount in total market share. Amongst different lender sorts, SFBs are additionally witnessing a major contraction, declining by 5.4 per cent Q-o-Q and 19.9 per cent Y-o-Y.