India's microfinance sector stabilises further, delinquencies fall to 2.1%; portfolio contracts 9%: Equifax Insights report

June 30, 2026

  • Industry 30+ delinquency improves sharply to 2.1% as of May 2026, down from 6.3% a year ago

  • Portfolio outstanding stands at Rs. 3,33,110 crore, down 9% YoY, as lenders continue calibrated growth

  • Disbursement volumes fall 15% YoY even as disbursed value holds nearly flat at Rs. 2,55,890 crore

  • NBFCs post the lowest delinquency among all lender categories; NBFC-MFIs drive half of all disbursements

  • Uttar Pradesh overtakes Tamil Nadu to become the second-largest state by portfolio outstanding while Bihar remains on the top position

Mumbai, July 02, 2026: India's microfinance industry is consolidating around materially stronger credit quality, with the 30+ days past due (DPD) delinquency rate falling to 2.1% as of May 2026, down sharply from 6.3% in May 2025 even as the sector continues to shrink in size, according to the latest Microfinance Insights report released by Equifax.

The total industry portfolio outstanding stood at Rs. 3,33,110 crore as of May 31, 2026, a 9% year-on-year contraction from Rs. 3,67,897 crore a year earlier. The pullback reflects a continuing, deliberate shift by lenders toward tighter underwriting and risk-calibrated growth rather than volume expansion. The number of active loans across the industry fell even more sharply, down 22% YoY to 10.09 crore.

"The decline in 30+ delinquency to 2.1%  less than half of what it was a year ago, reflects a sector that has worked through a difficult stress cycle and is emerging with materially stronger underwriting discipline. Lenders are clearly prioritising portfolio quality over scale, as seen in the continued contraction in disbursement volumes alongside flat disbursement value. NBFCs and NBFC-MFIs are leading this shift, and the consistent improvement across early and mid-stage delinquency buckets, even as legacy 180+ stress is worked through, suggests the foundations for sustainable, lower-risk growth are being put in place,” said Subhankar Mishra, Interim Managing Director, Equifax Credit Information Services.

Disbursement data reinforces this picture of caution. Between June 2025 and May 2026, disbursement volumes fell 15% compared with the same period a year earlier, while the value disbursed remained almost flat, edging up just 0.1% to Rs. 2,55,890 crore. This combination of fewer loans but steady overall value indicates that lenders are issuing larger, carefully vetted loans instead of aggressively expanding their borrower base.  

Asset quality has improved across every lender category over the past year. The industry's 90+ DPD delinquency rate eased to 1.4%, down 246 basis points YoY, while 30+ DPD delinquency improved by 419 basis points. NBFCs recorded the lowest delinquency across all early and mid-stage buckets, 1.5% at 30+ DPD and 0.8% at 90+ DPD outperforming NBFC-MFIs, private banks and small finance banks (SFBs). However, 180+ DPD delinquency, which captures legacy stress still working through the system, rose 381 basis points YoY to 16.0%, with SFBs (25.2%) and private banks (21.2%) carrying the highest late-stage stress.

NBFC-MFIs continue to anchor the industry's day-to-day lending activity, accounting for 43% of active loans and portfolio outstanding, and driving 49% of disbursement volume and 45% of disbursement value in the latest 12-month period up from 40% and 39%, respectively, a year earlier. Private banks' share contracted over the same period, while NBFCs and SFBs modestly expanded their footprint.

Geographically, the market remains concentrated, with the top five states accounting for 57% of total portfolio outstanding. In a notable shift, Uttar Pradesh overtook Tamil Nadu in May 2026 to become the second-largest state by portfolio outstanding, behind Bihar. Among the top 10 states, Odisha recorded the lowest early and mid-stage delinquency levels in May 2026, at 1.4% (30+ DPD) and 0.9% (90+ DPD), underscoring continued regional divergence in credit performance even as the broader trend points to nationwide improvement in early-stage asset quality.

The report also notes that the industry's asset-quality gains are broad-based rather than concentrated in a few pockets, with all four major lender categories, NBFC-MFIs, private banks, SFBs and NBFCs recording steady reductions in 30+ delinquency every quarter over the past year.

 

About Equifax

Equifax Credit Information Services Pvt. Ltd. (Equifax India) is one of India’s leading credit information and analytics companies and part of global data, analytics and technology leader Equifax Inc. Since launching its Consumer Bureau in 2010, Equifax India has built one of the country’s most inclusive credit data ecosystems, with over 2.1 billion reported tradelines and insights across retail, microfinance, commercial and employment segments.

Serving 7,000+ banks and NBFCs, Equifax India leverages advanced analytics, AI-driven solutions and cloud-enabled infrastructure to deliver high standards of data freshness and accuracy. The company plays a critical role in enabling responsible lending, strengthening risk management and expanding access to formal credit across India’s growing credit economy.

 

For any further details, please contact:

Suhas Diwakar Zele (Head of Marketing & Communications, Equifax India)
suhasdiwakar.zele@equifax.com & marcom.india@equifax.com 

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