Microfinance Stress Manageable: Ministry
Owaisi raised concerns about a 163 per cent surge in microfinance loan delinquencies amounting to Rs 43,000 crore in fiscal 2024-25, especially among small borrowers
HYDERABAD: Minister of state for finance Pankaj Chaudhary acknowledged a significant rise in stressed assets in the microfinance sector during a Lok Sabha session, responding to questions by Hyderabad MP Asaduddin Owaisi.
Owaisi raised concerns about a 163 per cent surge in microfinance loan delinquencies amounting to Rs 43,000 crore in fiscal 2024-25, especially among small borrowers. He sought the government’s assessment of risks to NBFC-MFIs, small finance banks and the wider credit ecosystem, along with any corrective measures in place.
Citing the Reserve Bank of India’s June 2025 Financial Stability Report, the minister revealed that microfinance loans overdue by 31-180 days increased from 4.3 per cent in September 2024 to 6.2 per cent in March 2025. The banking sector’s stressed microfinance portfolio also rose from 4.7 per cent to 6.5 per cent during the same period.
Chaudhary explained that the increase in delinquencies was mainly due to borrower overleveraging, weakening of joint liability groups and natural calamities, based on data from the Small Industries Development Bank of India (SIDBI). Despite rising delinquencies, the proportion of borrowers taking loans from three or more lenders — a key indicator of over-indebtedness — is on a declining trend, he informed.
On overall financial stability, Chaudhary pointed to improved resilience of the banking sector, with the Banking Stability Indicator strengthening in the latter half of FY 2024-25 and capital buffers of NBFCs comfortably above regulatory minimums.
To address these challenges, the minister outlined comprehensive RBI regulatory measures, including mandatory credit assessments verifying borrower income and existing liabilities; a 50 per cent cap on monthly loan repayments relative to income to prevent over-indebtedness; and board-approved policies to ensure interest rates remain non-usurious.
Additional safeguards come from self-regulatory organisations (SROs) like Sa-Dhan — an RBI-appointed association of impact finance institutions — and the Microfinance Industry Network (MFIN). These bodies enforce limits on borrower indebtedness and restrict the number of lenders per borrower, reducing risk exposure.