 "Microfinance loan book shrinks 3.5% to Rs 3.85 trillion in Dec quarter")
The gross loan portfolio in the micro finance segment shrunk by 3.5 per cent year-on-year (Y-o-Y) to ₹3.85 trillion during the third quarter of financial year 2025 (Q3FY25) as the period was marked by curtailed funding and strict credit underwriting.
The portfolio at risk, which is the share of loans overdue for 30-180 days, shot up to 6.4 per cent during Q3FY25 from 2 per cent in Q3FY24, according Micro Finance Institution Network (MFIN) data.
“The industry is going through a period of curtailed funding and stricter credit underwriting based on MFIN guardrails. The credit quality continued to be under close watch with slippages expected to have peaked by December 31. MFIN expects that the situation on both liquidity and credit quality will improve in Q4,” said Alok Misra, Chief Executive & Director at MFIN.
MFIN is an industry association of non-banking finance companies working as microfinance institutions (NBFC-MFIs), small finance banks and NBFCs and recognised as a self-regulatory organisation by the Reserve Bank of India.
Sequentially, loan portfolio of the sector declined from ₹4.08 trillion in the second quarter of FY25.
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The loan portfolio of non-banking finance companies working as microfinance institution (NBFC-MFIs) declined by 3.8 per cent Y-o-Y, banks by 5.5 per cent and small finance banks by 11.0 per cent.
The NBFCs, meanwhile, were an exception with 22.2 per cent Y-o-Y growth in loans.
The loan amount disbursed has reduced by 20 per cent Y-o-Y to ₹62,817 crore in the third quarter of FY 25 from ₹78,584 crore.
The number of new loans disbursed has de-grown by 29.02 per cent. In terms of geographical coverage, east and north-east and south comprise 63 per cent of the total microfinance portfolio, MFIN said.
The average loan size grew to ₹53,350 in December 2024 from ₹47,374 a year ago and sequentially from ₹50,487 in September 2024. The number of loan accounts for the sector declined to 139 million in Q3FY25 from 146 million in Q3FY24.
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