India’s microfinance institution (MFI) sector witnessed a nationwide improvement in asset quality during May 2026, driven by stronger repayment discipline. According to a report released by credit information bureau Crif High Mark, loan defaults ticked down across multiple delinquency buckets even as the industry’s gross loan portfolio expanded.
However, the recovery was uneven, with West Bengal, Madhya Pradesh, and Rajasthan emerging as geographic laggards reporting stress levels well above the national average.
The Numbers: National Asset Quality Trends
The overall microfinance loan book grew 0.7% month-on-month, reaching a massive ₹3.33 lakh crore in May. While active borrower accounts dipped marginally by 0.3% to 10.58 crore, the average loan ticket size held steady at ₹61,000, signaling steady borrower demand and prudent underwriting from lenders.
Nationwide, short-term and medium-term defaults both showed signs of recovery:
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1–30 Days Past Due (DPD): Short-term missed payments improved to 0.6% of the total portfolio, down from 0.8% in April.
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31–180 Days Past Due (DPD): Medium-term stress dropped slightly to 1.6%, down from 1.7% in the previous month.
Regional Disparities: The Stressed Pockets
Despite the positive macro trend, local economic factors or structural issues left three states trailing behind the national standard. West Bengal stands out as the most heavily impacted territory for MFI lenders.
Key Takeaway: While the microfinance engine remains structurally healthy with stable ticket sizes and lower overall defaults, lenders will need to carefully monitor exposure and risk management frameworks in high-stress states like West Bengal moving into the next quarter.
