Early-stage stress resurfaces in microfinance amid cautious lending trends

While overall asset quality improved in April, a rise in early delinquencies and slower loan disbursals indicate lenders remain focused on portfolio discipline

Early signs of stress resurfaced in India's microfinance sector in April, even as broader asset quality indicators continued to improve, suggesting lenders may not yet be out of the woods despite a gradual stabilisation in repayment trends.

 

The latest edition of CRIF High Mark's MicroLend Lite report showed that portfolio-at-risk (PAR) in the 1-30 days past due bucket rose to 0.8 per cent in April from 0.6 per cent in March.

 

The uptick came even as overall delinquency levels moderated, highlighting the uneven nature of the sector's recovery.

 

Overall PAR 1-180 days declined to 2.5 per cent in April from 2.6 per cent a month earlier. PAR 31-90 fell to 0.6 per cent from 0.8 per cent, while PAR 91-180 improved to 1.1 per cent from 1.2 per cent.

 

Banks recorded the sharpest increase in PAR 1-30, with the ratio climbing to 1.1 per cent in April from 0.8 per cent in March. Small finance banks also saw early delinquencies rise to 0.7 per cent from 0.5 per cent, while non-banking financial company-micro finance institutions (NBFC-MFIs) reported a marginal increase to 0.7 per cent from 0.6 per cent.

 

NBFCs emerged as the exception. Their PAR 1-30 ratio improved to 0.4 per cent from 0.6 per cent, making them the only lender category to register lower early-stage stress during the month.

 

CRIF High Mark noted that delinquency levels in the PAR 1-30 bucket “inched up slightly across lenders, except for NBFCs,” while performance in the higher overdue buckets improved across most lender types.

 

The report also showed that microfinance lenders pulled back on fresh loan disbursement in April, reflecting a continued focus on portfolio discipline over rapid expansion. According to CRIF High Mark data, total disbursements fell 31.5 per cent month-on-month (M-o-M) to ₹20,239 crore from ₹29,543 crore in March, while the number of loans disbursed declined to 3.25 million from 4.72 million.

 

CRIF attributed the slowdown in disbursements largely to seasonal factors. Even so, the stability in average ticket sizes suggests that demand for higher-value loans remains intact and that lenders are opting to moderate volumes rather than cut loan sizes.

 

Average ticket size remained broadly stable at ₹60,500.

 

The report further suggested that while lenders continue to rein in fresh originations, improving collections and lower delinquencies point to a gradual stabilisation in the sector.

 

Active loans declined across all the top-10 states, led by Bihar with a 1.6 per cent M-o-M fall, reinforcing lenders' focus on disciplined borrower acquisition. Maharashtra, Tamil Nadu and West Bengal witnessed a marginal contraction in portfolio outstanding during the month.

 

However, all top-10 states reported improvements in PAR 31-180 levels, indicating that repayment behaviour is strengthening across geographies.

 

India's microfinance portfolio outstanding stood at ₹3.31 trillion in April 2026, registering a marginal M-o-M increase of 0.1 per cent. However, the number of active loans declined 1.2 per cent to 106 million from 107 million in March, reflecting what the credit bureau described as a shift towards stricter lending practices and a greater emphasis on portfolio quality.

 

“The microfinance industry is slowly stabilising after a period of tighter risk controls. Although the number of active loans has decreased, the overall portfolio remains strong. This is due to better repayment habits, improved collections, and stricter lending practices by institutions," said CRIF High Mark.