4 hrs ago
Microfinance Lending Grows as Asset Quality Improves
Microfinance lenders and small finance banks made more loans in the second quarter.
They say this is happening as fewer borrowers are falling behind on payments and loan quality improves.
CreditAccess Grameen added borrowers and increased its lending.
Equitas and Ujjivan also reported growth in their loan books.
ICRA changed its outlook for the sector from negative to stable.
It said repayment problems were easing and lending was picking up.
Rules limit how much borrowers can owe and how many microfinance lenders they can borrow from.
Still, lenders are watching for problems in areas affected by drought or heavy rain and flooding.
CreditAccess Grameen reported 20% year-on-year asset growth to ₹30,946 crore in Q2FY27 and disbursed ₹6,355 crore.
Its 90-plus-day portfolio at risk fell to 1.1%, its lowest level in 10 quarters.
Equitas Small Finance Bank’s microfinance and micro-loans portfolio grew 86.65% year-on-year to ₹6,331 crore.
Ujjivan Small Finance Bank’s gross loan book grew 32.1% to ₹45,699 crore, with group microfinance loans up 19.5%.
ICRA upgraded its microfinance-sector outlook to stable, while lenders remain cautious about weather-related risks in some areas.
- Who
- CreditAccess Grameen, Equitas Small Finance Bank, Ujjivan Small Finance Bank, and other microfinance lenders.
- What
- Lenders reported growth in microfinance lending as delinquencies declined and asset quality improved.
- Where
- India, with weather-related concerns noted in Bihar, Uttar Pradesh, Chhattisgarh, Madhya Pradesh, Karnataka, and Maharashtra.
- When
- During the second quarter of FY27; the article also cites flooding in August and September 2026.
- Why
- Lenders are increasing disbursements amid improving asset quality, lower credit costs, and a recovery in sector activity.
Lending Recovery
Risk Caution
Increasing disbursements
Lending Recovery
Lenders are stepping up microfinance disbursements as delinquencies fall, asset quality improves, and credit costs are expected to decline.
Risk Caution
The industry is proceeding cautiously in drought-hit Karnataka and Maharashtra to avoid a buildup of fresh stress.
Improving portfolio quality
Lending Recovery
ICRA upgraded its sector outlook to stable, citing improving asset quality and recovering disbursements and assets under management.
Risk Caution
CreditAccess Grameen warned of a mild increase in its PAR accretion rate after excess rainfall and flooding in several regions.
Key facts
- CreditAccess Grameen assets
- ₹30,946 crore, up 20% year-on-year in Q2FY27.
- CreditAccess Grameen disbursements
- ₹6,355 crore, up 19%.
- CreditAccess Grameen PAR
- 90-plus-day portfolio at risk was 1.1%, the lowest in 10 quarters.
- Equitas microfinance portfolio
- ₹6,331 crore, up 86.65% year-on-year.
- Ujjivan gross loan book
- ₹45,699 crore, up 32.1% year-on-year as of Q2FY27.
- Borrower indebtedness guardrail
- A ₹2-lakh cap on total borrower indebtedness, including unsecured retail loans.
- Lenders-per-borrower guardrail
- A maximum of three microfinance lenders per borrower.
- Projected credit costs
- Expected to decline from a peak of 7.1% in FY25 to 2.4–2.8% in FY27.
Quotes
Alok Misra
CEO and director of the Micro Finance Industry Network (MFIN)
“While microfinance loans are not for agriculture/crop cultivation, considering the linkages to other related livelihoods, MFIN is keeping a close watch on the situation.”
financialexpress.com
Sources
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