Microfinance Rebound Gains Ground As Lenders Push Higher-Value Loans

India’s microfinance sector is recovering, but this time the rebound is being led by bigger, carefully selected loans to borrowers with stronger repayment records.

India’s microfinance industry has moved into a cautious recovery phase after months of portfolio stress, slower growth and tighter credit checks. The immediate trigger is fresh lending in February 2026, when the sector’s gross loan portfolio rose 2.5% month on month to ₹3.29 lakh crore, according to an Economic Times report published on 30 March 2026, based on Equifax India data. 

The improvement also came with better portfolio quality and a lower ageing bad-loan ratio, showing that lenders are expanding again, but with stricter borrower filters. 

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What Is Driving The Recovery?

The shift is visible in both monthly and annual data. MFIN’s Micro Matters: Macro View, India Microfinance Review FY 2024-25, launched on 14 November 2025, said the average ticket size rose 10.9% to ₹51,825. It also showed that loans below ₹30,000 formed just 6% of disbursements, while the ₹50,000 to below ₹1,00,000 bucket became the largest category for the first time
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That pattern continued in the latest quarterly reading. SIDBI’s Microfinance Pulse Report March 2026, released on 23 March 2026, said disbursement value in Oct-Dec 2025 rose 6% year on year. NBFC-MFIs accounted for about 44% of new sourcing, while private sector banks cut disbursements by 26%. 

A Mint report published on 17 March 2026 and a Business Standard report dated 16 March 2026 highlighted the same trend, with growth concentrated in larger-ticket lending.

What Changed Before This Turnaround?

The sector did not recover overnight. Earlier stress came from overleveraging, multiple lending and weaker collections. LoansJagat reported on 19 December 2025 that stress had eased to a four-quarter low as underwriting became tighter and lending turned more disciplined. It also flagged the impact of Sa-Dhan’s revised Sankalp 2.0, effective from 1 June 2025, which capped the number of lenders per borrower at 3. 

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Economic Times had reported on 12 February 2026 that the industry portfolio had fallen to ₹3.22 lakh crore, the lowest in 3 years, before the latest rebound began.
 

\This backdrop explains why lenders are now favouring repeat borrowers and bigger loans rather than chasing volume at the lower end.

What Stakeholders Are Saying?

Business Standard reported on 30 January 2026 that ICRA’s Karthik Srinivasan said “the worst is over”, while MFIN CEO Alok Misra said better liquidity support could help restart the funding cycle. 

The tone across the industry is still cautious, but clearly more positive than it was a few months ago.

Conclusion

The recovery in microfinance is visible, but it is still selective. Growth has returned through larger, safer loans, not broad-based risk-taking.