Microfinance Portfolios Expand in January Amid Sector Stabilization Signs

In January, private banks and NBFC-microfinance institutions (MFIs) expanded their microfinance portfolios, with NBFC-MFIs rising to ₹1.34 lakh crore and private banks to ₹84,735 crore, signaling early signs of sector recovery after eight quarters of stress. However, the overall microfinance market slightly declined to ₹3.21 lakh crore due to reductions by small finance banks and NBFCs. Larger NBFC-MFIs show stabilization, while medium and small MFIs face ongoing funding challenges. Experts expect market growth to normalize by Q1 FY27.