Industry AUM rose 3.3 per cent QoQ to about Rs 3.25 lakh crore in Q4 FY26 after seven consecutive quarters of decline. Sequentially, AUM marginally increased to Rs 3.27 lakh crore in Q1FY27. Quarterly disbursements increased to nearly Rs 77,500 crore in Q4 FY26, the highest level in eight quarters
Chennai: After seven consecutive quarters of decline, microfinance assets under management (AUM) rose in Q4 FY26 and disbursements too were highest in eight quarters. The guardrails imposed on borrowing have improved the health of the portfolio.
Industry AUM rose 3.3 per cent QoQ to about Rs 3.25 lakh crore in Q4 FY26 after seven consecutive quarters of decline. Sequentially, AUM marginally increased to Rs 3.27 lakh crore in Q1FY27. Quarterly disbursements increased to nearly Rs 77,500 crore in Q4 FY26, the highest level in eight quarters.
Asset quality has improved, supported by the clean-up of stress in the pre-guardrail portfolio and significantly lower delinquencies in the post-guardrail portfolio. PAR 1-30 declined to 0.5 per cent in June 2026 from 1.4 per cent in March 2025, while PAR 31-90 reduced to 0.7 per cent from 2.8 per cent. The post-guardrail portfolio is demonstrating healthier collection efficiency, finds CareEdge Ratings.
The industry had imposed self-regulatory guardrails to address borrower overleveraging and to strengthen origination discipline. It reduced the maximum number of microfinance lenders per borrower from four to three, capped aggregate microfinance indebtedness at Rs 2 lakh. It also included unsecured retail loans in the borrower’s leverage assessment and restricted fresh lending to borrowers with any existing loan outstanding dues exceeding Rs 3,000 that was more than 60 days past due.
NBFC-MFIs saw faster growth than the industry and their market share improved to 44 per cent in June 2026 from 39 per cent in March 2024, largely at the expense of banks.
Capital raising could constrain growth for some MFIs. Large MFIs accounted for about 98 per cent of incremental borrowings raised in FY26, while medium and small institutions continued to face constrained access and higher costs. Consequently, larger and well-capitalised MFIs will lead the sector growth.
A meaningful and sustained improvement in profitability, supported by healthy asset quality, would be key to attracting equity investors to the sector.
