For lenders and policymakers alike, the challenge will lie in maintaining credit outreach while ensuring that portfolio quality remains under tight control.
The amount disbursed during the April–June 2025 period has also fallen to Rs 57,127 crore from Rs 79,593 crore in the year-ago quarter. (Source: AI Image)
India’s microfinance industry, hailed as the backbone of India’s financial inclusion drive and a critical source of last-mile credit, continues to face sustained growth challenges. The latest data for the June 2025 quarter points to further moderation in business volumes and continuing pressure on asset quality in comparison to the year-ago period.
For instance, the gross loan portfolio (GLP) has declined consecutively over the past four quarters, falling from Rs 4,32,700 crore in June 2024 to Rs 3,81,200 crore in March 2025 and further to Rs 3,59,200 crore as of June 2025. The year-on-year decline stands at 17 per cent, while the quarter-on-quarter decline is 5.8 per cent, as per the latest CRIF MicroLend Report.
“The industry is prioritising risk management and portfolio stabilisation over aggressive growth, reflected in subdued lending activity and a stronger focus on liquidity. This moderation also aligns with the implementation of guardrails by self-regulatory organisation to mitigate overleveraging risks,” the report said.
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Other growth indicators reflect a similar trend. Active loan accounts fell to 13.2 crore in June 2025 compared to 15.9 crore in June 2024 and 14 crore in March 2025, translating into a 17.1 per cent year-on-year and 5.6 per cent quarter-on-quarter contraction and indicating a more cautious approach to new borrower acquisition.
The amount disbursed during the April–June 2025 period has also fallen to Rs 57,127 crore from Rs 79,593 crore in the year-ago quarter and Rs 71,644 crore in the immediately preceding quarter. Similarly, the number of loans disbursed during the quarter dropped to 1.01 crore from 1.63 crore during the June quarter last year and 1.33 crore during the March quarter 2025.
While the overall moderation has been broad-based across lender segments, the report points out that the decline in loan outstanding has been pronounced across states — notably Odisha, Tamil Nadu, Karnataka, and Rajasthan, with GLP dropping YoY by 24.7 per cent, 23.5 per cent, 22.9 per cent, and 20.5 per cent respectively during June quarter 2025.
The trend is seen across small-ticket as well as mid-ticket lending, suggesting that the slowdown is not confined to a particular borrower segment.
Loans in the Rs 80,000 - Rs 1 lakh range remained broadly stable YoY in absolute amount while loans exceeding Rs 1 lakh saw a notable increase in portfolio share from 4.6 per cent to 8.3 per ecnt.
This shift appears to be driven by two key factors, first, majority of Loans in this bucket being disbursed to higher vintage customers. For instance, for loans disbursed in the above Rs 1 lakh segment, 80 per cent of borrowers have a vintage of more than 24 months. Second, guardrails restricting the number of lender associations, which may have led to larger ticket sizes by limiting the fragmentation of borrowing across multiple lenders.
At the same time, asset quality pressures have also persisted. Portfolio-at-risk (PAR) in the 1–30 day bucket rose to 1.56 per cent in June 2025 from 1.21 per cent a year earlier and 1.43 per cent in the March 2025 quarter.
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PAR (31–90 days) has increased to 2.40 per cent in June 2025 from 1.47 per cent in June 2024, though it has come down from 2.73 per cent in March 2025. Similarly, PAR (91–180 days) stood at 3.11 per cent in June 2025, compared with 1.18 per cent in June 2024 and 3.45 per cent in March 2025. The aggregate PAR (1–180 days) has risen sharply to 7.06 per cent (3.86 per cent in June 2024), though it has marginally improved from 7.61 per cent in March 2025.
The report highlights that long-term stress indicators remain elevated. PAR in the 180+ (including write-offs) category stood at 12.43 per cent as of June 2025 — significantly higher than 5.26 per cent in June 2024 and 9.15 per cent in March 2025. While the improvement over the previous quarter offers a degree of relief, the overall trend suggests continued stress in the system.
For lenders and policymakers alike, the challenge will lie in maintaining credit outreach while ensuring that portfolio quality remains under tight control.
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