Listed MFIs slash Q2 losses to ₹61.8 crore amid sharp drop in provisions

While Provisions bill dips; income flows stay subdued

The listed microfinance institutions (MFIs) as a group cut their losses substantially to ₹61.8 crore during the second quarter ended September 2025 (Q2FY26) from losses worth ₹229 crore in the same quarter year ago on sharp reduction in provision and write-off bill. 

Sequentially also, the non-banking finance companies working as MFIs reduced their losses compared to ₹341 crore in the first quarter ended June 2025 (Q1FY26), according to analysis of five NBFC-MFIs by BS Research. 

Conscious low growth impacts income generation 

The operating income, which predominantly covers interest income, declined by 15.5 per cent year-on-year (Y-o-Y) basis to ₹3,501.9 crore in Q2FY26 from ₹4,145.5 crore in Q2FY25. 

However, sequentially, it showed improvement with 1.1 per cent growth over ₹3,464.2 crore in Q1FY25. The interest costs were down 12.5 per cent Y-o-Y to ₹1,289.2 crore in Q2FY26 from ₹1,473.9 crore in Q2FY25. Sequentially, they inched up from ₹ 1,291.7 crore in Q1FY26.  

 

CareEdge Ratings’ latest research on NBFC-MFIs showed the microfinance industry’s gross loan portfolio declined by 17 per cent Y-o-Y to ₹3.5 trillion by the end of September 2025. After a degrowth of 14 per cent in FY25, the industry is expecting a modest growth of four per cent for NBFC-MFIs in FY26.

 

This downturn is on account of multiple structural issues, including borrower overleveraging and the implementation of guardrails, which require further tightening of lending norms, in turn increasing rejection rates and slowing disbursements, the rating agency added.  

 

Clean-up burden on decline  

 

The provision and write-offs expenses, amount set aside for stress assets in compliance with regulations and clean up, declined by 40.1 per cent Y-o-Y to ₹1,150.2 crore in Q2FY26 from ₹1,918.7 crore in Q2FY25.

 

Sequentially also they were down by 20.1 per cent over ₹1,441.1 crore in June 2025 quarter.  

 

AM Karthik, co-head, financial sector ratings, ICRA told Business Standard that the stress which is sitting in the zero to 90-day bucket, loans showing payment delays but have not become non-performing assets (NPA), has been steadily coming down.

 

The collection efficiency is also improving. The collection on current loans, which was possibly in the region of 98.5 per cent, is inching towards 99 per cent plus now. The slippage which was close to 1.5-2 per cent of the book has come down to one per cent now, he added.