Higher-ticket loans drive microfinance disbursals in Oct-Dec: Equifax-SIDBI

Loans above Rs 75,000 now account for 38% of microfinance disbursals, reflecting lenders' growing preference for larger exposures to existing borrowers, says Equifax-SIDBI report

Microfinance loans above Rs 75,000 now account for 38 per cent of total disbursement value, up from 25 per cent a year earlier, while the share of loans below Rs 50,000 has fallen to 17 per cent from 33 per cent in the October–December 2025 quarter, according to the Microfinance Pulse Report released by Equifax India in collaboration with the Small Industries Development Bank of India (SIDBI).

 

The shift points to improving credit confidence and lenders’ increasing preference to extend higher exposure to existing, proven borrowers, according to the report.

 

The shift towards higher-ticket loans has pushed the industry’s average ticket size to a historic high of Rs 61,253 during the October–December 2025 quarter, marking a 16 per cent year-on-year increase. Lenders are increasingly focusing on borrowers with stronger repayment histories rather than on boarding new customers, reflecting a cautious approach as the sector gradually recovers from a prolonged period of stress.

   

As of December 31, 2025, the microfinance industry’s total portfolio outstanding stood at Rs 27 trillion, down 22 per cent compared to the previous year. The contraction reflects tighter underwriting, moderated expansion strategies, and the introduction of stricter guardrails to restrict the number of loans and leverage at a borrower level, the report said.

 

Overall, the microfinance sector recorded a 6 per cent year-on-year rise in disbursement value during the October–December 2025 quarter. However, the growth has been uneven across lender categories. Private sector banks sharply curtailed their exposure, registering a 26 per cent contraction in disbursements compared with the same period a year earlier. In contrast, non-banking financial company–microfinance institutions (NBFC-MFIs) and NBFCs posted strong growth of about 27 per cent and 26 per cent, respectively.

 

This divergence has reshaped market share dynamics within the sector. NBFC-MFIs now account for around 44 per cent of new sourcing in the industry, reinforcing their dominant position in the microfinance space. Overall, NBFCs together hold about 60 per cent of the industry’s portfolio outstanding.

 

Despite the shrinking portfolio, asset quality indicators have improved across most lender categories. Industry-level 30+ days past due (DPD) delinquency fell to 3.90 per cent in December 2025 from 6.92 per cent a year earlier, reflecting lower incremental slippages and improved recoveries. However, the 180+ DPD bucket rose during the quarter, suggesting that legacy stress continues to move through ageing loan accounts.

 

“The meaningful decline in delinquencies (30–179 dpd) to 3.9 percent reflects improved credit discipline, more calibrated underwriting and stronger risk monitoring across lenders. However, we must remain cognizant that while fresh slippages are under better control, legacy stress is still working its way through ageing buckets, as evidenced by the 180+ dpd bucket rising by 81 bps from September to December 2025,” said Aditya B. Chatterjee, Managing Director, Equifax.

 

Among the top states, most recorded a decline in microfinance exposure during the year. Bihar retained the largest microfinance portfolio despite a 23 per cent year-on-year drop, while Karnataka saw the sharpest contraction at 34 per cent. Tamil Nadu reported the lowest 30+ delinquency among the top ten states.

 

The report noted that the sector is transitioning from a phase of rapid, volume-driven growth to one focused on sustainable and risk-aligned expansion, with lenders prioritising portfolio quality and disciplined underwriting as the industry stabilises.