Resilient Recovery: Microfinance Finds Its Footing Again

This joint report by TransUnion CIBIL and Sa-Dhan examines the current state of India's microfinance sector as it emerges from a challenging period marked by elevated delinquencies, borrower over-indebtedness concerns, and portfolio contraction. The report highlights how the industry has responded through stronger risk management practices, implementation of guardrails, and the value of data-driven lending to support sustainable growth and financial inclusion. Key highlights from this report are:

• Responsible lending practices are strengthening portfolio quality. Continued implementation of industry guardrails has reduced originations among borrowers with more than two active lenders and those with aggregate exposure above ₹1 lakh, helping curb excessive indebtedness and improve borrower outcomes.

• Asset quality indicators are showing signs of recovery. Delinquency rates across 30+, 60+, and 90+ DPD categories declined quarter-on-quarter as of June 2026, while newer loan vintages are demonstrating improved repayment performance under enhanced underwriting and monitoring frameworks.

• The sector is balancing recovery with growth opportunities. While the microfinance portfolio declined 6% year-on-year and borrower volumes have reduced, significant headroom remains for expanding financial inclusion, particularly through data-enabled identification and re-engagement of previously active borrowers.