A notable shift is underway in India’s microfinance sector, with lenders moving towards higher-value loans, pushing the industry’s average ticket size to a record high, according to the Equifax-SIDBI Microfinance Pulse Report.
Loans above ₹75,000 now account for 38% of total disbursement value, up from 25% a year ago. At the same time, the share of loans below ₹50,000 has dropped to 17% from 33% in the October–December 2025 period.
Industry trends
The average ticket size rose to ₹61,253 in October–December 2025, marking a 16% year-on-year increase from ₹52,748. This reflects a clear shift towards higher-value lending and stronger credit confidence among lenders.
Despite this, the total microfinance portfolio outstanding declined 22% year-on-year to ₹2,69,897 crore as of December-end 2025. The report attributes this contraction to tighter underwriting, controlled expansion and stricter limits on borrower leverage.
Lending activity and outlook
“While the overall outstanding portfolio has contracted, new lending activity has registered steady growth. Industry disbursements for the October–December 2025 quarter saw a 6% year-on-year growth, reaching ₹63,348 crore, alongside a clear redistribution of market share,” the report stated.
Aditya B Chatterjee said, “What we are witnessing is a necessary and healthy correction in the microfinance cycle. Periods of accelerated growth are often followed by consolidation, and this phase appears to be restoring balance in the system.”
Risk and repayment trends
The sector has seen a sharp improvement in repayment behaviour. The 30+ days past due (DPD) delinquency has nearly halved year-on-year. Early-stage stress (1–29 DPD) and mid-stage delinquencies have also declined over the past 4 quarters.
Borrower leverage remains stable, with single-lender borrowers rising to 73% in December 2025, indicating better credit discipline.
Chatterjee added that delinquency levels (30–179 DPD) have declined to 3.9%, reflecting improved underwriting and monitoring. However, he cautioned that legacy stress remains, with the 180+ DPD bucket rising by 81 bps between September and December 2025.
Market dynamics
NBFC-MFIs now account for 44% of new loan sourcing, strengthening their position. In contrast, private sector banks reduced exposure, with disbursals declining 26%.
The report highlighted that microfinance higher ticket sizes reflect lender confidence in existing borrowers rather than stress-driven borrowing. It also stressed that prudent, data-led growth will ensure long-term stability in the sector.
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