Microfinance Loans Fall 5%: Is Your MFI Loan Safe?

India's microfinance sector shrank 5% in a year. If you have a small loan from an MFI or NBFC, here is what the stress in this sector means for your borrowing, repayment, and credit score.

Here's what happened: India's total microfinance gross loan portfolio contracted about 5% year-on-year to roughly ₹3.28 lakh crore as of September 2024, signalling broad stress across the sector.. NBFC-MFIs increased their market share to 44.7%, overtaking banks and small finance banks as the dominant lenders in the microfinance space.. Average loan ticket sizes rose even as overall disbursements fell, suggesting lenders are concentrating credit among fewer, existing borrowers rather than expanding reach..

What you should do: Check your CIBIL report for microfinance loan enquiries — if you have 3 or more MFI accounts open simultaneously, your score may already be affected; download your free annual report at CIBIL.com.. Avoid borrowing from multiple MFIs at the same time — RBI's microfinance guidelines cap your total repayment obligation at 50% of household income, and lenders are now enforcing this more strictly.. If your MFI lender sends a recovery agent to your home, note that RBI rules require agents to carry an authorisation letter and visit only between 8 AM and 7 PM — file a complaint at RBI's Sachet portal if violated..

Pro tip: RBI mandates that all MFI borrowers receive a loan card in local language showing the exact interest rate and all charges — demand it before signing any microfinance agreement.