Mumbai: Microfinance lenders displayed early signs of stabilisation in the March 2026 quarter, even as the industry's portfolio contracted sharply from a year earlier and legacy stress continued to accumulate, according to the latest MFI Pulse Report by Equifax and SIDBI.
Portfolio Overview
The sector's total outstanding portfolio stood at Rs 2,77,053 crore as of March 31, 2026, marking a 17% year-on-year decline from Rs 3,35,060 crore in March 2025. However, sequentially, the data indicated a turnaround, with a 3% quarter-on-quarter increase between December 2025 and March 2026, the first such expansion in several quarters.
Lending Patterns Shift
Lending patterns revealed a structural shift towards existing borrowers, as institutions reduced exposure to new customers. The share of new-to-credit borrowers fell steadily from 33% in January-March 2023 to 26% in January-March 2024, 21% in January-March 2025, and further to 20% in January-March 2026. Conversely, the share of existing-to-credit borrowers rose from 67% to 80% over the same period, reflecting a preference for customers with established credit histories.
Borrower Leverage Moderates
Borrower leverage moderated across key states after regulatory tightening. Between September 2025 and March 2026, the proportion of borrowers with four or more active loans declined in the top five states. Bihar saw this share drop from 4.07% to 2.03%. Karnataka recorded a fall from 2.18% to 1.25%, while Uttar Pradesh experienced a reduction from 2.11% to 1.24%. Tamil Nadu's share decreased from 1.60% to 1.12%. West Bengal remained the least leveraged market, with the proportion falling from 1.51% to 0.69%.
Loan Sizes Increase
Loan sizes continued to rise as lenders shifted towards higher-value disbursements. The share of loans above Rs 75,000 increased from 26% in January-March 2025 to 41% in January-March 2026. Meanwhile, the share of loans below Rs 50,000 declined. This trend pushed the average ticket size up by 19% over five quarters, from Rs 52,789 in January-March 2025 to Rs 62,945 in January-March 2026.
Asset Quality Mixed
Asset quality trends presented a mixed picture. The overall 30+ days past due delinquency rate improved significantly, falling from 6.64% in March 2025 to 2.35% in March 2026, supported by tighter underwriting and a reduction in early-stage delinquencies in the 30-179 days bucket. Near-term stress remained contained, with 1-29 days past due at 1.21% in March 2026.
However, stress in older loan cohorts intensified. The 180+ days past due bucket rose from 10.68% in March 2025 to 17.11% in March 2026. According to the report, this increase reflects ageing stress from loans originated during the 2024 expansion phase, suggesting that lenders may need to undertake significant write-offs to clean up balance sheets.
