Chapter 3 - Section 3.4.8Trends in clients and loan outstanding of MLIs

The growth in client base and loan outstanding within the microfinance sector has been fluctuating over the years. In the financial year 2024-25, the client base of Micro Lending Institutions (MLIs) contracted by (-10%), with loan outstanding decreasing by (-9%), as depicted in Figure 3.16. This decline in the portfolio and client base was chiefly driven by liquidity constraints, escalating credit risk, and regulatory challenges. Limited access to fresh liquidity curtailed their capacity to issue new loans and expand portfolios. Concurrently, the sector faced significant repayment stress, reflecting borrower difficulties and rising delinquencies. Overleveraging, often due to multiple loans and increasing ticket sizes, further impaired borrowers’ repayment abilities, contributing to higher default rates. Collectively, these factors led to a contraction in the MLIs’ loan portfolio and a drop in active clients during the fiscal year, signalling a cautious recalibration amid sustained sectoral stress.

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3.4.8 Trends in clients and loan outstanding of MLIs

The growth in client base and loan outstanding within the microfinance sector has been fluctuating over the years. In the financial year 2024-25, the client base of Micro Lending Institutions (MLIs) contracted by (-10%), with loan outstanding decreasing by (-9%), as depicted in Figure 3.16. This decline in the portfolio and client base was chiefly driven by liquidity constraints, escalating credit risk, and regulatory challenges. Limited access to fresh liquidity curtailed their capacity to issue new loans and expand portfolios. Concurrently, the sector faced significant repayment stress, reflecting borrower difficulties and rising delinquencies. Overleveraging, often due to multiple loans and increasing ticket sizes, further impaired borrowers’ repayment abilities, contributing to higher default rates. Collectively, these factors led to a contraction in the MLIs’ loan portfolio and a drop in active clients during the fiscal year, signalling a cautious recalibration amid sustained sectoral stress.

Figure 3.16: Growth in MLIs clients and loan outstanding over the Years

District-wise Loan Outstanding 5

Source: Equifax India

Portfolio size category No. of Districts
< ₹100 Cr. 213
₹100 Cr.–₹500 Cr. 308
₹500 Cr.–₹2,000 Cr. 229
> ₹2,000 Cr. 24

According to data from Equifax India, another major credit bureau, micro-lenders operate across 774 districts in 36 States and Union Territories. Of these, 24 districts reported an outstanding portfolio exceeding ₹2,000 Cr. This group includes 10 districts in Bihar, 5 in West Bengal, 4 each in Tamil Nadu and Karnataka, and 1 in Uttar Pradesh. A further breakdown reveals that 18 districts had portfolios above ₹2,000 Cr., 5 districts exceeded ₹3,000 Cr., and only 1 district (Murshidabad of West Bengal) recorded a portfolio above ₹4,000 Cr.

The number of districts with GLP above ₹2,000 Cr. declined from 35 in FY 2023-24 to 24 in FY 2024-25. Portfolios between ₹500 Cr. and ₹2,000 Cr. were reported in 229 districts, primarily from states such as Bihar, Tamil Nadu, Uttar Pradesh, West Bengal, Karnataka, Madhya Pradesh, Odisha, Jharkhand, Rajasthan, and Maharashtra. Additionally, 308 districts recorded GLPs in the range of ₹100 Cr.–₹500 Cr., while another 213 districts had GLPs below ₹100 Cr.