Microfinance Industry Network (MFIN) expects the industry’s portfolio to grow by 15% to around ₹3.75 lakh crore in FY27, as the sector recovers from a prolonged period of contraction. MFIN Chief Executive and Director Alok Misra speaks to Narayanan V about the recovery in portfolio growth, El Niño risks, asset quality, guardrails and funding challenges facing smaller MFIs. Excerpts:
Have MFIN’s two guardrails helped reduce borrower leverage?
The guardrails addressed two major concerns — reducing the number of borrowers with more than three lenders and ensuring that people should not have more than ₹2 lakh of aggregate loan value and follow the RBI’s repayment norms. As of June, 90.4% of microfinance borrowers have two or fewer lenders and 7.5% have three lenders. Totally, 97.9% are within guardrail based on the number of clients. Only 2% of clients are outside, compared to 10-12% earlier. Around 97% of borrowers have loans of less than ₹2 lakh.
As a result, the portfolio-at-risk (PAR) recovery has fared better than our expectation despite slow disbursement. Generally, when disbursements are low, portfolio quality will be bad. But as of June, PAR 1-30 days has come down to 0.6% and 31-90 days is around 0.7%. So, total 1-90 days is around 1.3%, reflecting normalcy and a good-quality portfolio.
Can the sector cross the ₹4 lakh-crore gross loan portfolio (GLP) this fiscal?
As of May 2026, the GLP was around ₹3.28 lakh crore. In April, we were worried about the El Niño impact, but rainfall has recovered. Now, we face the problem of excess rainfall and flooding in places like Assam and the northeastern parts of the country. The main worry regarding crop damage because of less rainfall has been avoided. Even if we consider a 15% increase, GLP will be around ₹3.75 lakh crore.
Why are banks still reluctant to lend to microfinance despite improving asset quality?
The share of NBFC-MFIs in total portfolio has increased to 44% from 39% last year while bank’s share has come down to 26% from 34% One reason is that specialised microfinance institutions are better equipped and more risk-taking in nature, so they will continue to expand and even reach 50% share.
Some mainstream NBFCs and fintechs are lending to the same clientele without following the guardrails, creating problems in cases where multiple lenders are involved – some abide by the rules while others flout.
We are telling RBI to look into it and make erring entities fall in line. Otherwise, there will be another crisis.
Have you issued any advisory to MFIs on the El Niño and weather-related risks?
Except Assam, there is no problem now. In Assam, we have issued a guideline to the members telling them to follow the RBI and SLBC guidelines for offering a moratorium wherever the client is affected. There is an up to six-month moratorium.
In other states, members have been advised to remain careful in handling various issues. If the need is genuine, disbursals will be made.
Are banks reluctant to lend to smaller MFIs despite the ₹20,000-crore credit guarantee scheme?
The total guarantee to small MFIs is only around ₹310 crore. That’s a major cause of concern. We are expecting some ₹100 crore by the time the scheme closes. We will keep pursuing the bankers and try to convince them about small players and how to have a differential outlook while lending to them. Having said that, 90% of the sector comprises large MFIs who don’t have liquidity issues. Even people are not taking sanctions under the guarantee scheme.