Microfinance Institutions' Assets Under Management Expected to Grow 20% YoY to Rs 143,000 Crore by FY2026-27: Crisil Ratings

The assets under management of the microfinance institutions (MFIs) will accelerate 20% year-on-year growth to Rs 143,000 crore in fiscal year 2026-27 against 4% growth in FY26, according to Crisil Ratings. The growth, according to the rating agency, will primarily be driven by non-microfinance portfolios such as gold loans, lending to micro, small and medium enterprises (MSMEs), loans against property and individual loans. The microfinance portfolio is expected to grow 13% reflecting a gradual recovery after last fiscal’s deceleration. The rating agency noted that MFI lending was muted due to asset-quality pressures and limited access to funding till the third quarter of the previous fiscal. “But from the fourth quarter, growth began to pick up as challenges eased and this trend is likely to continue,” Crisil noted Malvika Bhotika, Director, Crisil Ratings said the tighter control over portfolio quality by MFIs reflected in the loans originated after August 2024 due to guardrails imposed by the sector. “Accounting for 80% of MFI AUM, the portfolio at risk over 90 days is low at below 1% of this book,” she said. Crisil also noted that 66% of the MFI AUM as of March 2026 comprised loans to borrowers in their second cycle or more compared to 53% two fiscals back, reflecting the rising share of new loans to existing customers with good repayment history. “The average ticket size of such disbursements has risen by 15% to Rs 59,000 since last fiscal,” the report said. Prashant Mane, Associate Director, Crisil Ratings said MFIs are increasingly focusing on secured offerings including gold loans, secured MSME loans and loans against property, aside from individual loans. “In the last one year itself, the share of such loans in their AUM rose to 14% from 6%. We see this darting to 18% by the end of this fiscal,” Mane said. Despite these improvements in credit quality, Crisil also warned that the microfinance segment is exposed to idiosyncratic risks ranging from localised social political disruptions to weather-related income shocks, which can drive sharp volatility in borrower repayment behavior and credit costs.