Micrometer is the flagship publication of MFIN which
covers the progress of Indian microfinance industry on a quarterly frequency.
As of June 30, 2026, microfinance operations are spread across 36 States/UTs and 718 districts. Although the first quarter of the year is historically sluggish, data for Q1 FY 26-27 indicates that the industry grew by 1.1% QoQ and has successfully sustained the growth momentum witnessed in the last quarter. The total portfolio of the microfinance industry as on June 30, 2026 stands at Rs 3,28,708 Cr. On a YoY basis, however, industry saw a drop of 6.9% in portfolio. The industry disbursed Rs 61,718 Cr during the first quarter of FY 26-27 which represents an impressive jump of 8.9% over the first quarter of last financial year. The portfolio quality has improved further – PAR 31-180 which was 5.6% at the end of Q1 FY 25-26 has come down to 1.6% as on June 30, 2026. The improvement is significant in comparison to the last quarter as well when it was 2.1%.
In terms of portfolio share, NBFC-MFIs hold 44.3% of the total industry portfolio. Banks hold the second largest share with 25.3% which is slightly lower than its share in the previous quarter. Share of SFBs and NBFCs has increased marginally. On YoY basis, there has been an increase in portfolio of NBFC-MFIs (5.2%) and NBFCs (2.7%). Portfolio of Banks has dropped by 28.5%, most of which due to reclassification of microfinance portfolio to retail, causing overall industry portfolio to drop. The funding received by member NBFC-MFIs during the quarter, showed a remarkable 91.4% increase on a YoY basis. The increase in funding was seen across all categories – small, medium and large NBFC-MFIs.
East & Northeast is still the largest region in microfinance sector with 36.6% share. South remains the second-largest region, although its share has declined by almost 1.4% over the last year. Top 3 states remained unchanged with Bihar at the top followed by UP and Tamil Nadu and the top 10 states account for ~83% of the portfolio.
Dr. Alok Misra, CEO & Director of MFIN said “The industry has sustained the growth momentum seen in the last quarter, marking a turnaround after seven consecutive quarters of slowdown. Growth has been driven primarily by NBFC-MFIs and higher loan sizes, reflecting a degree of consolidation around existing borrowers. Along with the guardrails, this has contributed to the significant improvement in portfolio quality, as a larger share of lending is going to borrowers with an established credit history in the formal system. Portfolio health has also benefited from a better-than-anticipated monsoon. Other than Rajasthan, none of the top 10 states has seen a deterioration in the monsoon outlook since June, with several large microfinance markets experiencing normal or near-normal rainfall. This has supported local economic activity and, at present, a slowdown in demand does not appear to be a concern.
While the GLP has
inched up, the increase would have been much higher but for the shifting of
loans from microfinance bureau to retail bureaus. As the regulation is clear
that all unsecured loans extended to households below annual household income
of 3 lakh are microfinance, the issue has been taken up with the RBI.
Relatedly, since reporting compliance is closely linked to the household income
limits defined for microfinance households, these limits also merit review.
Since the last revision in 2022, household incomes, wages and the general price
level have increased materially, reducing the real value of the existing Rs 3
lakh threshold.”