A quiet change in strategy is unfolding in India’s banking sector. Axis Bank is now evaluating the purchase of a 66% promoter stake in CreditAccess Grameen, the country’s largest microfinance institution. The stake is held by its Netherlands-based promoter entity, CreditAccess India BV. This move marks a sharp contrast to the bank’s stance in December 2024, when microfinance acquisitions were not a priority.
To understand this shift, look back at Axis Bank’s earlier experience with Spandana Sphoorty. In 2021, Axis explored acquiring the lender but walked away after valuation disputes between its founder and its private equity backer. There were also concerns about the reliability of its collection data. That episode made Axis cautious about microfinance deals.
Then came FY25, when the microfinance sector hit a rough patch. Delinquency rates jumped from about 2% to nearly 6%. Heavy lending in 2024 pushed many borrowers into multiple loans. State-level restrictions in Karnataka and Tamil Nadu further slowed collections. Stocks crashed, some by as much as 68%. The sector shrank by 7% as lenders cut back.
CreditAccess Grameen, however, recovered faster than peers. By Q3 FY26, its gross NPAs stayed stable after touching nearly 4% in 9MFY25. Its NIM improved by about 2%. Profit fell 9.5% year-on-year to ₹438 crore, but this was far better than Spandana Sphoorty, which saw NIMs drop 4% and losses widen 17% to ₹704 crore.
This turnaround makes CreditAccess Grameen attractive at today’s lower valuations. It also fits Axis Bank’s push toward retail lending. The bank wants 58–60% of its loan book in retail and 23–25% in wholesale. A microfinance lender offers instant scale. CreditAccess Grameen serves 4.4 million borrowers, 99% of them women. Axis currently lends to about 2.2 million women. Nearly 39% of CreditAccess Grameen’s new customers are new to credit, creating strong cross-sell potential.
The risks remain real. Microfinance runs on different models of lending, recovery, and risk control. Integration could be harder than Axis’s earlier retail acquisition. The Economic Survey warns: “While the microfinance sector has evolved significantly over the past decade, its continued growth would hinge on strengthening enabling infrastructure (such as the tools to assess creditworthiness), ensuring responsible lending practices, and continuously strengthening institutional resilience to manage cyclical volatility.”
For Axis Bank, the crisis in microfinance may have opened a door. Whether the deal happens and how it performs will define the next phase of its retail expansion.
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