The number of active microfinance loans also dipped to 10.28 crore. Lenders pulled back on new credit, with the total volume of disbursed loans falling 18% and the overall value of those loans shrinking 4% between May 2025 and April 2026.
The Silver Lining: A Dramatic Drop in Bad Loans
While growth slowed down, the industry’s overall health improved dramatically. The 30+ days past due (DPD) delinquency rate—a key metric tracking loans that are overdue by more than a month—plunged from 6.4% in April 2025 down to just 2.5% in April 2026.
Industry experts view this shift as a sign that lenders are cleaning up their acts by using stricter background checks, tighter credit monitoring, and a more cautious approach to risk. Non-Banking Financial Companies (NBFCs) led the way with the lowest rates of overdue loans, allowing NBFCs and dedicated microfinance institutions (NBFC-MFIs) to steadily capture more market share.
Key Takeaways at a Glance
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Geographic Concentration: The top five states still dominate the sector, holding 57% of the country’s total microfinance portfolio.
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Pockets of Growth: Despite the nationwide slowdown, states like Bihar, Uttar Pradesh, Rajasthan, and Jharkhand bucked the trend, showing positive year-on-year growth in new loan disbursements.
