After Eight Quarters of Stress, Signs of Stabilisation Emerge

Private banks and NBFC-MFIs expanded their microfinance portfolios in January (vs December), signalling early consolidation after a prolonged stress phase.

Portfolio Movement (MoM)

• NBFC-MFIs: ₹1.34 lakh crore (up from ₹1.32 lakh crore)

• Private Banks: ₹84,735 crore (up from ₹82,347 crore)

• Overall Market: ₹3.21 lakh crore (vs ₹3.22 lakh crore)
  Declines at small finance banks and NBFCs offset gains elsewhere.

Source: Equifax. Pace of overall contraction moderated.

Industry Commentary

• Alok Misra, CEO, Microfinance Industry Network:
  Expects return to normal growth by end of Q1 FY27, supported by improving asset quality and liquidity conditions.

• JM Financial:
  Calls this phase an inflection point — shifting from contraction to stabilisation and gradual recovery.

Segment Trends

• Large NBFC-MFIs: Showing early recovery signs

• Medium & small NBFC-MFIs: Continue to decline amid funding constraints

Asset Quality Snapshot

• 30+ DPD: 3.4% (↓ 54 bps MoM)

• >180 DPD: 17% (↑ 92 bps MoM)

Early-stage delinquency improvement is broad-based across states and lender categories — suggesting peak stress may be behind the sector.