31 | Annual Report | 2025-2026 India’s economic growth and long-term development agenda continue to place financial inclusion at the heart of national progress. While significant advances have been made in bringing more people into the formal financial system, a large number of low-income households and micro-entrepreneurs still have limited access to formal credit. This creates a significant opportunity for microfinance institutions. Demand for small-ticket loans remains strong across rural, semi-urban, and emerging urban markets, driven by entrepreneurship, livelihood generation, and the aspiration for financial independence. By expanding our presence in these markets, we can support economic empowerment while strengthening our growth prospects. The rapid development of India’s digital infrastructure is creating new opportunities for the microfinance sector. Digital identity systems, online payment platforms, and data-sharing frameworks have simplified customer onboarding, credit assessment, and collections processes. These advancements help improve operational efficiency, strengthen risk management, and enhance customer experience. At the same time, increasing formalisation of the economy is improving visibility into the financial activities of small businesses, enabling lenders to better assess creditworthiness and support enterprise growth. This creates opportunities to move beyond traditional lending models and support micro-enterprises more effectively. The industry’s increasing focus on credit discipline is also contributing to improved portfolio quality. Stronger underwriting practices, better monitoring systems, and regulatory measures aimed at preventing borrower overindebtedness have helped strengthen the overall health of the sector. As a result, asset quality trends are showing signs of improvement across the industry. Our Company remains committed to maintaining prudent lending practices, supported by advanced analytics, robust credit assessment processes, and continuous portfolio monitoring. Looking ahead, geographic expansion and product diversification remain key growth drivers. Government investments in rural infrastructure, connectivity, and economic development are creating new livelihood opportunities and expanding the addressable market for financial services. In response, we are broadening our product offerings to meet the evolving needs of our customers. In addition to traditional microfinance loans, opportunities exist in areas such as micro-enterprise finance, affordable housing, education finance, and healthcare-related lending. A diversified product portfolio can help deepen customer relationships while enhancing business resilience. As the sector continues to evolve, strong governance, technology adoption, and sustainable business practices will become increasingly important. Institutions that maintain high standards of compliance, transparency, and customer protection are likely to be better positioned to attract capital and create long-term value. Furthermore, the sector’s contribution to financial inclusion, women’s empowerment, and livelihood generation aligns closely with broader ESG objectives. Going forward, the success of the microfinance sector will depend on balancing growth with responsible lending, innovation with risk management, and financial performance with social impact. By staying focused on these priorities, our Company remains committed to empowering underserved communities, creating sustainable value for stakeholders, and contributing to India’s inclusive growth journey. INDUSTRY OVERVIEW: As of March 31, 2026, the Indian microfinance sector recorded a total loan portfolio outstanding of INR 3,25,174 Cr. The industry currently serves 10.1 crore active loan accounts across the country. On a year-on-year basis, the total portfolio experienced a degrowth of 13.3%. NBFC-MFIs continue to be the dominant providers of micro-credit, holding the largest market share at 44.2% with a loan amount outstanding of INR 1,43,586 Cr. Banks represent the second-largest segment, securing a 26.5% share equivalent to INR 86,033 Cr. SFBs account for 15.8% of the universe at INR 51,238 Cr, while regular NBFCs and other MFIs constitute 12.3% and 1.3% respectively. The NBFC-MFI sector remains highly consolidated; large institutions (Asset Under Management of INR 2,000 Cr or more) account for 94.1% of the total industry AUM and 91.9% of the client base. Geographically, the East and North-East regions hold the largest portion of the portfolio at 36.6%, followed by the South at 25.1%. The market is geographically concentrated, with the top 10 states constituting 83.6% of the overall gross loan portfolio. Bihar remains the largest market by outstanding portfolio at INR 52,940 Cr, trailed closely by Uttar Pradesh and Tamil Nadu. Among the top
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