Microlending Sector Expands by 31% in Latest Quarter, Dominated by NBFC-MFI

Mumbai, Mar 27 - The microlending sector in India has witnessed a significant surge, with a 30.9% growth in its portfolio reaching Rs 4.02 lakh crore during the December quarter. This growth is not just an isolated figure but marks a 6% increase from the September quarter-end, showcasing a robust upward trend in the industry. A recent report by a credit information company has shed light on these developments, highlighting the dynamic landscape of microlending across various lender categories.

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Non-banking finance company-microfinance institutions (NBFCs-MFI) have emerged as the frontrunners in this sector, claiming a market share of 38.3%. They are closely followed by banks, which hold a 33.4% share, small finance banks at 17.4%, and other NBFCs at 9.4%. This distribution underscores the diverse nature of the microlending ecosystem in India.

From an asset quality perspective, the industry appears to be on stable ground. Loans not serviced for over 30 days have maintained stability at 2%, and similarly, those not serviced for over 90 days are stable at 0.9%. This stability is crucial for the health and sustainability of the microlending sector.

The average balance per borrower has seen a slight increase to Rs 48,900 during the December quarter, up from Rs 48,200 in the previous quarter and Rs 46,900 from the same period last year. This incremental growth indicates a growing reliance on microloans by borrowers across the country.

An interesting insight from the report is that a significant majority (83.4%) of borrowers had exposure to less than two lenders in December. Tamil Nadu recorded the highest prevalence of multiple borrowings per borrower, pointing towards a concentrated pattern of borrowing in specific regions.

West Bengal and Uttar Pradesh experienced the highest growth rates during the quarter compared to the preceding quarter. However, Bihar emerged as the state with the highest share in the gross loan portfolio. The top ten states together constitute an overwhelming 83% of the overall microlending industry, highlighting geographical concentrations within this sector.

The microlending industry's growth trajectory is indicative of its vital role in providing financial inclusion and support to various segments of society. With NBFCs-MFI leading the charge and a stable asset quality across the board, the sector is poised for further expansion. The insights into borrower behaviors and regional trends offer valuable perspectives for stakeholders aiming to navigate and thrive in this evolving landscape.