Microfinance asset quality stress eased further in June, with the portfolio at risk declining to 2.3%, according to data from CRIF, a credit information bureau. The improvement marks a continued recovery for a sector that faced significant asset quality challenges following the pandemic, when overdue levels had risen sharply and multiple lenders were forced to restructure or write down stressed portfolios.

Aggressive write-offs of bad loans by lenders contributed to the reduction in stressed loans across the microfinance sector. The industry has been consolidating toward better portfolio performance and larger loan sizes as part of a broader trend among lenders, many of which have tightened underwriting standards and shifted focus toward repeat borrowers with established repayment histories.

The average ticket size rose to Rs 62,100 as lenders increasingly focused on serving existing borrowers rather than expanding their customer base. Microfinance disbursements reached Rs 61,100 crore during the first quarter. India's microfinance sector serves tens of millions of low-income borrowers, predominantly in rural and semi-urban areas, making asset quality trends a key indicator of household financial health at the base of the economic pyramid.

CRIF is one of the credit information bureaus operating in India, providing data and analytics on lending trends across the financial sector. Portfolio at risk is a standard metric used to measure the share of loans that have overdue payments beyond a specified threshold.

Source: Economic Times Markets