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Tezzbuzz Desk- A major change has been seen in India's microfinance sector in the last one year. On one hand, the number of people taking loans and the total loan portfolio has decreased, while on the other hand, the share of large size loans has increased rapidly. According to CRIF High Mark's June 2026 Micro Land Report, the number of borrowers to microfinance has declined by about 17 percent from 8 crore to 6.6 crore. Whereas the total microfinance portfolio decreased from Rs 3.59 lakh crore to Rs 3.33 lakh crore.

Despite this decline, the average loan size available to existing customers has increased. The average exposure on an active loan has increased by about 19 per cent to about Rs 32,400. This means that companies are now giving loans of higher amounts to fewer customers than before. The number of active loans has also decreased from 13.2 crore to 10.3 crore. This indicates that the lending strategy in the sector has become more cautious than before.

The new loan figures make this change more clear. In the April-June 2026 quarter, microfinance companies distributed new loans worth about Rs 61,172 crore. This is about 20 percent less than the previous quarter, although it increased by 18.6 percent compared to the same quarter last year. During this period, the average size of new loans increased from about Rs 54,000 to Rs 62,000. The biggest change is visible in the categories of small and big loans. The amount of new loans up to Rs 30,000 decreased by about 35 percent in a year. On the contrary, there was a huge increase of about 90 percent in loans of more than Rs 1 lakh. The share of loans above Rs 1 lakh in new loans also increased from about 9 percent to 14 percent. This means that the inclination of the sector is moving from small ticket loans towards big ticket loans.

Companies are now relying more on old customers rather than new customers. About 55.5 percent of the total amount of new loans given in the first quarter of the financial year 2027 went to those customers who were old customers of the respective lender. The share of old customers in loans of more than Rs 1 lakh was about 77.6 percent. It is clear from this that companies are comfortable in giving more amount to such customers whose previous payment record is better.

A major reason for this change is the problem of over-borrowing and default that has emerged in the last years. In June 2025, the overdue portfolio for 91 to 180 days was 3.1 percent, which came down to 0.8 percent in June 2026. Whereas overdue of 31 to 180 days reduced from 5.5 percent to 1.6 percent. This indicates improvement in loan recovery and credit quality. The effect of the rules implemented to prevent over-borrowing is also visible. Rules like limit of maximum three microfinance lenders for a customer and not giving new loan if it is overdue by more than 60 days are applicable. According to the data, the overdue of 31 to 180 days was only 1.9 percent among customers with two or less lenders, while it reached 7.9 percent among customers with five or more lenders.

However, the increasing trend towards bigger loans also brings with it risks. Delinquency among customers with exposure above Rs 2 lakh is higher than the industry average. Factors like rural income, monsoon, farming costs and inflation can impact the ability to repay loans in future. Overall, the microfinance sector now appears to be more cautious and focused on low-risk customers. The decline in the number of small borrowers and the rapid increase in large loans definitely raises the question whether microfinance is now moving away from its original objective i.e. easy financial access to small and needy borrowers. The biggest challenge facing the sector in the coming times will be to maintain access to small borrowers along with controlling the risks.