Bigger Loans, Smaller Portfolio: Average Microfinance Loan Size Jumps 17.5% to Rs 63,000
Average microfinance loan size in India jumped 17.5% to Rs 63,000 in Q2 FY27, as lenders pivot toward higher-value loans for stronger borrowers.
The landscape of micro-lending in India is shifting. According to a recent report by CRIF Credit Information Services Private Limited, the average microfinance loan size has seen a significant spike, rising 17.5 per cent year-on-year to reach Rs 63,000 in the second quarter of FY27.
This upward trend reflects a strategic pivot by lenders who are increasingly focusing on higher-value loans, supported by the emergence of stronger borrower profiles. On a shorter timeline, the average ticket size also grew by 1.6 per cent compared to the previous quarter.
The Shift Toward High-Value Credit
The data reveals a clear migration toward larger loan amounts. While the sector has traditionally focused on very small sums, the distribution is now leaning toward more substantial credit lines:
- Rs 50,000 to Rs 80,000: This remains the dominant category, accounting for approximately 41 per cent of the total origination value.
- Rs 80,000 to Rs 1 lakh: This segment saw a notable increase, growing to 18.5 per cent from 14.7 per cent a year prior.
- Above Rs 1 lakh: High-value loans now make up 15.1 per cent of originations, up from 11.2 per cent in the same period last year.
A Shrinking Overall Portfolio
Interestingly, while individual loans are getting larger, the total microfinance portfolio is actually contracting. As of September 2026, the overall portfolio stood at Rs 328.4 thousand crore, marking a 5 per cent decline year-on-year and a 1.4 per cent dip quarter-on-quarter.
The report attributes this reduction to a moderation in loan originations during the preceding quarter and a period of policy recalibration within the industry. Despite the shrinking total value, the sector continues to reach a massive scale, with 9.6 crore active loans serving 6.4 crore borrowers as of September 2026.
Asset Quality and Repayment Trends
From a risk perspective, the sector remains stable. Most delinquency categories—including Portfolio at Risk (PAR) for 1-30, 31-90, and 91-180 days—have remained below the 1 per cent mark.
However, there was a slight uptick in early-stage delinquency, with PAR 1-30 increasing by 10 basis points between June and September 2026. Meanwhile, PAR 31-90 and PAR 91-180 held steady at 0.8 per cent.
The Danger of Over-Leveraging
The report highlights a critical correlation between the number of lenders a borrower uses and their likelihood of default. The data suggests that "multi-lending" significantly increases risk:
- 1-2 Lenders: These borrowers make up 81.2 per cent of the portfolio and show a PAR 31-180 of 1.9 per cent.
- 3 Lenders: The delinquency level jumps to 4.1 per cent.
- More than 3 Lenders: The risk spikes further, with delinquency reaching 6.6 per cent.
Who is Leading the Market?
NBFC-microfinance institutions (NBFC-MFIs) have strengthened their grip on the market. In Q2 FY27, they accounted for nearly 50 per cent of all loan disbursements, up from 47.7 per cent in Q2 FY26. Meanwhile, traditional NBFCs and small finance banks maintained a steady share of around 14 per cent in loan originations by value.