NBFC-MFIs Dominate India’s Microfinance Space with 44.7% Market Share
NBFC-MFIs now hold 44.7% of India's microfinance market as loan sizes grow and asset quality improves, according to a new CRIF report.
The landscape of micro-lending in India is witnessing a significant shift, with Non-Banking Financial Company-Microfinance Institutions (NBFC-MFIs) emerging as the dominant force. According to a recent report by CRIF Credit Information Services, the portfolio share of NBFC-MFIs climbed to 44.7 per cent as of September 2026, cementing their position as the primary lending segment in the industry.
Industry Portfolio and Borrower Trends
While NBFC-MFIs are gaining ground, the overall gross loan portfolio of the microfinance sector saw a slight moderation, settling at Rs 328.4 thousand crore. The total industry portfolio experienced a year-on-year decline of 5.0 per cent and a quarter-on-quarter dip of 1.4 per cent.
Despite the contraction in total outstanding loans, the sector remains active with 9.6 crore active loans serving a live borrower base of 6.4 crore individuals. Interestingly, the average exposure per loan has seen a sharp increase, rising 22.7 per cent year-on-year to reach Rs 34.2 thousand.
The report attributes this shift to several key factors:
- A consistent move toward larger-ticket loans.
- Increased concentration of borrowers who deal with fewer active lenders.
- The growing influence and reach of NBFC-MFIs.
Fresh Lending and Loan Sizes
Even with the dip in total outstanding amounts, fresh lending activity has gathered momentum. In the second quarter of financial year 2027, disbursements reached Rs 56,956 crore. Although this was a 7.5 per cent decline from the previous quarter, it represented a 5.1 per cent increase compared to the same quarter last year.
The average ticket size for these disbursements climbed 17.5 per cent year-on-year to Rs 63.1 thousand. The report highlights that first-time borrowers are still a vital part of the ecosystem, accounting for 19.7 per cent of sanctioned loans and 16.5 per cent of the total sanctioned amount.
The Shift Toward Larger Loans
The trend toward higher loan amounts is evident in the data. Loans in the Rs 50,000 to Rs 80,000 bracket now make up 41.3 per cent of the total origination value. Even more striking is the growth in high-value loans, with disbursements for loans exceeding Rs 1 lakh surging by 41.3 per cent year-on-year.
Lender Performance and Asset Quality
The growth trajectory varies across different types of lenders. NBFC-MFIs held an outstanding portfolio of Rs 146.7 thousand crore, a 9.4 per cent increase year-on-year. While general NBFCs also recorded growth, banks saw their microfinance portfolios contract. This decline in bank portfolios is partly attributed to the reclassification of microfinance exposures into retail loans.
On the health of the loans, asset quality indicators remain stable. The Portfolio at Risk (PAR) between 31 and 180 days improved significantly, dropping to 1.6 per cent in September 2026 from 4.6 per cent in September 2025.
Stability is particularly high among borrowers who avoid over-leveraging. Those linked to two or fewer active lenders make up 81.2 per cent of the aggregate portfolio and maintain a lower PAR 31-180 of 1.9 per cent.
Geographic Distribution
The microfinance sector remains heavily concentrated in a few regions, with the top ten states accounting for 82.3 per cent of the total gross loan portfolio.
- Bihar: Holds the largest portfolio at Rs 51.1 thousand crore, boasting a strong PAR 31-180 of 1.2 per cent.
- Tamil Nadu: Follows with a portfolio of Rs 40.3 thousand crore, following a 3.7 per cent sequential expansion.
"The September 2026 edition of MicroLend indicates that India's microfinance sector continues to consolidate around stronger borrower profiles and larger loan sizes," the report stated, noting that regulatory guardrails and reduced lender concentration are supporting stable performance.