West Bengal, however, moved in the opposite direction. The state’s microfinance loan book shrank while the share of overdue loans increased.
India’s total outstanding microfinance loans stood at ₹3.33 lakh crore as of June 2026, up 0.6% from the previous quarter. These loans were spread across 10.3 crore active accounts belonging to 6.6 crore borrowers.
Fewer borrowers falling behind on repayments
The share of loans where repayments were overdue generally declined during the quarter.
Loans overdue by between 31 and 180 days accounted for 1.6% of the total loan portfolio in June, down from 2% in March.
Within this, loans overdue by 91 to 180 days fell to 0.8% from 1.2%. The share of loans overdue by shorter periods remained broadly unchanged.
Microfinance NBFCs gain market share
Non-banking financial companies specialising in microfinance, or NBFC-MFIs, continued to increase their share of the market.
Their outstanding loan portfolio grew 5.2% from a year earlier and 1.3% from the previous quarter. As a result, NBFC-MFIs accounted for 44% of India’s microfinance market in June 2026, up from 38.8% a year earlier.
The rest of the market is shared by banks, small finance banks and other NBFCs.
New lending falls from previous quarter
Microfinance lenders gave out ₹61,100 crore in new loans during the April-June quarter.
That was 19.9% lower than in the previous quarter, which the report attributed to seasonal factors. Compared with the same quarter last year, however, new lending was 18.6% higher.
Borrowers are also increasingly taking larger loans. The average size of a new loan increased to ₹62,000.
The value of loans above ₹1 lakh jumped 89.8% from a year earlier, showing a sharp increase in demand for bigger-ticket microfinance loans.
Borrowers taking fewer loans from multiple lenders
There was also a decline in the number of borrowers juggling loans from several lenders at the same time.
About 95.6% of borrowers had loans from three or fewer lenders as of June 2026, compared with 90.1% a year earlier.
Having fewer simultaneous loans can reduce the risk of borrowers taking on more debt than they can repay.
West Bengal bucks the national trend
The picture varied significantly across states.
In Bihar, the share of new loans above ₹1 lakh increased to 16% from 9.8% a year earlier. Jharkhand saw the share rise to 10.3% from 7.7%.
Tamil Nadu had the highest share of large loans among the country’s top 10 microfinance markets, with loans above ₹1 lakh accounting for 30% of new lending.
West Bengal, however, stood out for weaker trends. Its microfinance loan portfolio fell 20.7% from a year earlier, while loans overdue by 31 to 180 days accounted for 2% of the portfolio.
Karnataka saw a sharp improvement in repayments. The share of loans overdue by 31 to 180 days dropped to 1.3% in June 2026 from 12.5% a year earlier.
What does the data show?
Overall, India’s microfinance sector appears to be stabilising, with overdue loans declining and borrowers increasingly taking larger loans while reducing their dependence on multiple lenders.
The improvement, however, is not uniform across the country. West Bengal remains a notable exception, with its microfinance loan book shrinking and overdue loans moving higher.
