Beyond Microcredit - Evolving Role of Micro Lending Institutions (MLIs)

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Chapter 2 - Section 2.3Loan Outstanding Analysis

At the close of FY 2024-25, the total microcredit loan outstanding across all micro-lenders was ₹ 3,81,225 Cr., reflecting a year-on-year decline of 14%. Most of the micro-lenders reported negative growth during the reporting period, with the Small Finance Banks (SFBs) experiencing the steepest decline at 20%, followed by NBFC-MFIs at 18% and Banks at 10%. Conversely, non-NBFC-MFIs and NBFCs reported positive growth of 34% and 0.2%, respectively. The overall reduction in loan outstanding was driven not by a decrease in demand but by a deliberate attempt by the lenders due to significant repayment stress and a strategic shift toward cautious risk management. This included measures such as restrictions on multiple lending, enhanced credit assessments, and liquidity crunch during FY 2024-25.

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Loan Outstanding (in ₹ Cr.) across micro-lenders

Market Share of micro-lenders in terms of Loan Outstanding (in %)

Regional distribution of loan outstanding (in %)

2.3 Loan Outstanding Analysis

2.3.1 Loan Outstanding (in ₹ Cr.)2
Figure 2.3: Loan Outstanding (in ₹ Cr.) across micro-lenders

2 Off-balance sheet (managed, assigned, and business correspondent) loan outstanding of NBFC-MFIs, NBFCs, and Non-Profit MFIs is included under the Bank’s category

At the close of FY 2024-25, the total microcredit loan outstanding across all micro-lenders was ₹3,81,225 Cr., reflecting a year-on-year decline of 14%. Most of the micro-lenders reported negative growth during the reporting period, with the Small Finance Banks (SFBs) experiencing the steepest decline at 20%, followed by NBFC-MFIs at 18% and Banks at 10%. Conversely, non-NBFC-MFIs and NBFCs reported positive growth of 34% and 0.2%, respectively. The overall reduction in loan outstanding was driven not by a decrease in demand but by a deliberate attempt by the lenders due to significant repayment stress and a strategic shift toward cautious risk management. This included measures such as restrictions on multiple lending, enhanced credit assessments, and liquidity crunch during FY 2024-25.

2.3.2 State/UT-wiseLoanOutstanding(in₹Cr.)

Table 2.4 outlines the loan outstanding across States and Union Territories. Year-on-year analysis reveals that 32 States/UTs experienced a decline in loan outstanding during the period. Only four states with relatively smaller microfinance footprints—Arunachal Pradesh (29%), Nagaland (24%), Telangana (14%), and Meghalaya (8%)—recorded positive growth.

In contrast, major states with significant loan outstanding, including Tamil Nadu (-20%), Karnataka (-17%), Bihar (-12%), Uttar Pradesh (-10%), and West Bengal (-9%), witnessed substantial declines. The widespread stress in the microfinance industry, primarily driven by credit overexposure and related recovery challenges, led to a reduction in fresh credit disbursements and, consequently, a decrease in loan outstanding

Furthermore, the state-level regulatory interventions— such as the Karnataka Micro Loan and Small Loan (Prevention of Coercive Actions) Bill, 2025, created some apprehension among the lenders regarding potential operational constraints and increased compliance requirements.

Table 2.4 Loan Outstanding (in ₹ Cr.) of all micro-lenders across States/UTs - March 2025 and March 2024 (in descending order of Loan Outstanding)
S. No State/UT March 2025
(in ₹ Cr.)		 March 2024
(in ₹ Cr.)		 Y-o-Y Growth
(in %)
1 Bihar 57,712 65,487 -12%
2 Tamil Nadu 46,833 58,239 -20%
3 Uttar Pradesh 41,774 46,304 -10%
4 West Bengal 36,730 40,328 -9%
5 Karnataka 35,351 42,560 -17%
6 Maharashtra 29,596 33,304 -11%
7 Madhya Pradesh 21,653 24,870 -13%
8 Odisha 20,719 25,615 -19%
9 Rajasthan 14,930 18,144 -18%
10 Kerala 11,273 14,159 -20%
11 Jharkhand 11,149 13,118 -15%
12 Gujarat 10,913 13,107 -17%
13 Andhra Pradesh 7,322 8,346 -12%
14 Assam 7,082 7,410 -4%
15 Chhattisgarh 6,553 7,493 -11%
16 Telangana 5,717 5,015 14%
17 Haryana 5,138 6,236 -18%
18 Punjab 4,372 5,684 -23%
19 Tripura 2,196 2,314 -6%
20 Uttarakhand 1,749 2,077 -16%
21 Puducherry 671 842 -20%
22 Delhi 616 795 -23%
23 Himachal Pradesh 160 182 -12%
24 Goa 155 195 -21%
25 Meghalaya 139 129 8%
26 Sikkim 131 133 -1%
27 Mizoram 111 121 -9%
28 Arunachal Pradesh 105 81 29%
29 Others 90 172 -48%
30 Jammu & Kashmir 80 83 -4%
31 Manipur 80 104 -23%
32 Nagaland 68 55 24%
33 Chandigarh 46 54 -15%
34 Andaman and Nicobar Islands 18 20 -9%
35 Dadra and Nagar Haveli 14 16 -12%
36 Daman and Diu 7 9 -20%
37 Lakshadweep 0.02 0.03 -39%
Industry 3,81,225 4,42,700 -14%
Figure 2.4: Market Share of micro-lenders in terms of Loan Outstanding (in %)

In terms of market share of loan outstanding, NBFC-MFIs remained the dominant providers of microcredit, accounting for 39% of the total market. Banks held the second-largest share at 32%, followed by Small Finance Banks (SFBs) with 16%, NBFCs with 12%, and Others comprising the remaining 1%.

2.3.3 State/UT-wise Loan Outstanding per Unique Active Borrowers (in ₹)

Table 2.5 provides data on loan outstanding per unique active borrowers across States and Union Territories, showing an overall year-on-year decrease of 10%. This decline is largely attributable to a more cautious and risklimiting stance adopted by micro-lenders in response to rising delinquencies and increased borrower leverage. Additional contributing factors include regulatory measures imposed by self-regulatory organizations, such as restrictions on the number of micro-lenders and caps on combined microfinance and retail (unsecured) loan exposure for households, which is not to exceed ₹2 lakhs.

Table 2.5 Loan Outstanding per Unique Active Borrowers across States/UTs (in ₹) - March 2025 and March 2024 (in descending order of Loan Outstanding per Unique Active Borrowers)
S. No State/UT March 2025
(in ₹)		 March 2024
(in ₹)		 Y-o-Y Growth
(in %)
1 Karnataka 56,362 64,925 -13%
2 Puducherry 55,327 65,511 -16%
3 Tamil Nadu 54,776 62,807 -13%
4 Bihar 51,136 59,885 -15%
5 Kerala 50,968 63,826 -20%
6 West Bengal 47,973 52,251 -8%
7 Goa 47,633 54,891 -13%
8 Tripura 47,511 50,321 -6%
9 Maharashtra 47,091 50,897 -7%
10 Jharkhand 46,446 53,636 -13%
11 Arunachal Pradesh 45,962 41,109 12%
12 Odisha 45,956 55,495 -17%
13 Dadra and Nagar Haveli 45,316 78,249 -42%
14 Uttar Pradesh 44,949 50,674 -11%
15 Jammu & Kashmir 43,378 45,016 -4%
16 Daman and Diu 43,199 1,25,812 -66%
17 Uttarakhand 42,798 48,560 -12%
18 Chhattisgarh 42,695 45,277 -6%
19 Haryana 42,375 47,611 -11%
20 Madhya Pradesh 42,239 46,344 -9%
21 Nagaland 42,152 39,504 7%
22 Rajasthan 41,364 47,192 -12%
23 Gujarat 40,747 47,948 -15%
24 Sikkim 40,624 41,890 -3%
25 Himachal Pradesh 39,867 43,301 -8%
26 Andaman and Nicobar Islands 39,006 41,657 -6%
27 Punjab 38,568 42,901 -10%
28 Chandigarh 36,618 39,493 -7%
29 Delhi 35,139 39,346 -11%
30 Assam 33,844 37,602 -10%
31 Lakshadweep 32,741 53,477 -39%
32 Meghalaya 31,852 31,454 1%
33 Mizoram 30,455 32,032 -5%
34 Telangana 27,165 17,378 56%
35 Manipur 22,988 24,798 -7%
36 Andhra Pradesh 22,176 18,002 23%
37 Others 21,303 35,207 -39%
Industry 46,064 51,051 -10%

On a year-on-year comparison, 31 States and Union Territories recorded a decline in loan outstanding per borrower, with the exception of five states with relatively limited microfinance market presence i.e., Telangana (56%), Andhra Pradesh (23%), Arunachal Pradesh (12%), Nagaland (7%), and Meghalaya (1%)—which experienced increases. In contrast, key states with substantial loan outstanding, such as Bihar (-15%), Tamil Nadu and Karnataka (-13% each), Uttar Pradesh (-11%), and West Bengal (-8%), witnessed notable declines in loan outstanding per borrower

Table 2.6 Distribution of industry loan outstanding (in ₹ Cr.) across active lenders and borrowers’ credit exposure as of March 2025

The following table depicts the distribution of loan outstanding (in ₹ Cr.) across different numbers of active lenders and borrowers’ credit exposure:

Active Lenders/ Borrower Credit Exposure < ₹1 Lakh ₹1 Lakh–₹1.25 Lakh ₹1.25 Lakh–₹1.5 Lakh ₹1.5 Lakh+
< 2 lenders 2,31,500 26,083 12,065 9,139
3 lenders 21,399 13,233 10,134 11,303
4 lenders 6,136 6,041 6,095 9,470
5 lenders 1,807 2,639 3,463 10,718

It can be observed from Table 2.6 above that the majority of the industry loan outstanding, i.e., 61% is concentrated within the bucket of less than 2 active micro-lenders and having a credit exposure of less than ₹1 lakh. The guardrails introduced by the SROs, such as capping the number of micro-lenders at 3 micro-lenders, the total credit exposure of a borrower at ₹2 lakhs, among others, and complemented by the RBI regulations, forms part of a broader framework aimed at ensuring responsible lending, strengthening borrower protection etc. which have limited the borrowers’ credit exposure, thereby reducing risk and contributing to more sustainable microfinance operations.

Figure 2.5: Regional distribution of Loan Outstanding (in %)

In terms of regional distribution of loan outstanding, the Eastern region—comprising Bihar, Odisha, Jharkhand, West Bengal, and Andaman & Nicobar Islands—led with a 33% market share. This was followed by the Southern region, which includes Andhra Pradesh, Karnataka, Kerala, Tamil Nadu, Telangana, Puducherry, and Lakshadweep, accounting for 28%. The Central region, consisting of Madhya Pradesh, Uttar Pradesh, Chhattisgarh, and Uttarakhand, held 18% of the market share. The Western region, covering Gujarat, Maharashtra, Goa, and Dadra & Nagar Haveli and Daman & Diu, contributed 11%, while the Northern region— encompassing Delhi, Haryana, Rajasthan, Punjab, Chandigarh, Himachal Pradesh, Jammu & Kashmir, and Ladakh—accounted for 7%. The Northeastern states, including Assam, Manipur, Tripura, Nagaland, Sikkim, Meghalaya, Mizoram, and Arunachal Pradesh, had the smallest share at 3%.

2.3.4 State/UT-wise Average Balance per Loan Account (in ₹)

The State and Union Territory-wise average balance per loan account is detailed in Table 2.7. As of March 31, 2025, the overall average balance per loan account in the microfinance industry stood at ₹27,251, reflecting a year-on-year decline of 1% from ₹27,441 recorded on March 31, 2024.

On a Y-o-Y comparison, 25 States and UTs experienced a decrease in average balance per loan account. Notable declines were observed in key states with significant loan outstanding, including Karnataka (-6%), Bihar (-3%), Uttar Pradesh (-2%), West Bengal (-1%), and Tamil Nadu (-0.1%).

Table 2.7: Average Balance per Loan Account (in ₹) - March 2025 and March 2024 (in descending order of Average Balance per Loan Account)
S. No State/UT March 2025
(in ₹)		 March 2024
(in ₹)		 Y-o-Y Growth
(in %)
1 Andaman and Nicobar Islands 34,230 36,859 -7%
2 Dadra and Nagar Haveli 34,177 33,884 1%
3 Nagaland 33,213 34,081 -3%
4 Sikkim 33,173 31,711 5%
5 Tripura 32,171 32,227 0%
6 Tamil Nadu 30,886 30,909 0%
7 Puducherry 30,452 31,006 -2%
8 Arunachal Pradesh 30,257 27,420 10%
9 West Bengal 29,880 30,324 -1%
10 Jammu & Kashmir 29,298 30,143 -3%
11 Delhi 28,653 29,738 -4%
12 Daman & Diu 28,632 32,106 -11%
13 Bihar 28,525 29,532 -3%
14 Himachal Pradesh 28,425 28,487 0%
15 Karnataka 27,946 29,574 -6%
16 Uttarakhand 27,885 28,441 -2%
17 Kerala 27,855 28,995 -4%
18 Uttar Pradesh 27,636 28,279 -2%
19 Haryana 27,517 27,144 1%
20 Assam 27,359 28,892 -5%
21 Chhattisgarh 26,823 26,238 2%
22 Madhya Pradesh 26,702 26,610 0%
23 Meghalaya 26,702 25,998 3%
24 Gujarat 26,679 28,077 -5%
25 Maharashtra 26,592 26,708 0%
26 Rajasthan 26,505 26,751 -1%
27 Jharkhand 26,145 26,689 -2%
28 Mizoram 26,053 26,189 -8%
29 Chandigarh 25,944 25,524 2%
30 Goa 25,912 28,939 -10%
31 Punjab 25,071 23,796 5%
32 Odisha 24,720 26,123 -5%
33 Lakshadweep 21,827 26,738 -18%
34 Manipur 21,194 22,540 -6%
35 Telangana 19,348 12,643 53%
36 Others 17,445 24,192 -28%
37 Andhra Pradesh 14,642 12,157 20%
Industry 27,251 27,441 -1%
2.3.5 Top States and Districts in terms of Loan Outstanding:

The top 10 States and top 25 districts in terms of total loan outstanding at the end of the FY 2024-25 are given in Table 2.8 and Table 2.9, respectively. Bihar continues to be the top state in terms of loan outstanding, and the top 5 states continue to be the same for the last two years.

Table 2.8: Top 10 States in terms of Loan Outstanding (in ₹ Cr.)
Microfinance Industry – all micro-lenders
State Loan Outstanding
(in ₹ Cr.)
Bihar 57,712
Tamil Nadu 46,833
Uttar Pradesh 41,774
West Bengal 36,730
Karnataka 35,351
Maharashtra 29,596
Madhya Pradesh 21,653
Odisha 20,719
Rajasthan 14,930
Kerala 11,273

The top 10 states accounted for 83% of the share in the industry loan outstanding, while the top 5 states alone accounted for 57% of the industry loan outstanding.

Similarly, the loan outstanding of the top 25 districts in the country is mapped and given below. This data is the cumulative outstanding of various micro lenders as of 31 March 2025 in these 25 districts.

Table 2.9 Top 25 Districts in terms of Loan Outstanding (in ₹ Cr.)
Microfinance Industry – all micro-lenders
State District Loan Outstanding
(in ₹ Cr.)
West Bengal Murshidabad 4,239
Bihar East Champaran 3,855
Bihar Muzaffarpur 3,681
Bihar Samastipur 3,655
West Bengal North 24 Parganas 3,154
Karnataka Mysuru 3,081
Bihar Madubani 3,036
Karnataka Belagavi 2,867
Bihar Darbhanga 2,715
Tamil Nadu Cuddalore 2,703
West Bengal South 24 Parganas 2,657
Bihar West Champaran 2,597
Bihar Aurangabad 2,396
Tamil Nadu Thanjavur 2,365
Bihar Purnia 2,317
Bihar Sitamarhi 2,315
Bihar Begusarai 2,279
Karnataka Tumkur 2,242
Bihar Vaishali 2,242
West Bengal Nadia 2,215
Tamil Nadu Salem 2,201
Uttar Pradesh Gorakhpur 2,156
West Bengal Howrah 2,133
West Bengal Hooghly 2,101
Maharashtra Nagpur 2,091

The top 25 districts by loan outstanding included 11 districts from Bihar, 6 from West Bengal, 3 from Tamil Nadu, 3 from Karnataka, and one each from Maharashtra and Uttar Pradesh. All these districts had loan outstanding exceeding ₹2,000 Cr., with 7 districts surpassing ₹3,000 Cr. Murshidabad district in West Bengal recorded the highest loan outstanding, exceeding ₹4,000 Cr. The combined loan outstanding of the top 25 districts accounted for 18% of the industry loan outstanding, while the top 10 districts alone contributed 9%. A notable decline was observed in the number of districts with loan outstanding greater than ₹2,000 Cr., falling from 41 as of March 31, 2024, to 29 as of March 31, 2025.