MFIs witness a 4 million dip in number of borrowers

Mumbai: The microfinance sector witnessed a significant contraction, with active borrower accounts declining by 4,000,000, according to the Reserve Bank of India's latest Financial Stability Report. This sharp drop comes in the wake of tighter regulatory oversight and more stringent underwriting practices, which have curbed fresh borrower additions and dampened lending activity.

Credit flow to microfinance institutions has also been adversely impacted. Bank credit to the sector fell by 13.8% in FY25, reducing its overall share to 48.3%. The decline reflects growing stress in the segment, with lenders becoming increasingly cautious amid rising portfolio risks.