MFI loan disbursement falls 25 pc to Rs 1.12 lakh cr in FY25

New Delhi, Jun 11 (PTI) Loan disbursed by microfinance institutions (MFIs) have declined by 25 per cent to Rs 1.12 lakh crore in FY25 reflecting stress in the sector.

Loan amount of Rs 1,12,459 crore was disbursed in 2024-25 through 2.2 crore accounts, including disbursement of owned as well as managed portfolio, Microfinance Institution Network (MFIN), an umbrella body of the microfinance institutions (MFIs), said in its report released on Wednesday.

MFIs loan disbursement in FY25 was 25.4 per cent lower than the amount disbursed in 2023-24, it said.

However, the average loan amount disbursed per account during FY25 was Rs 50,131 which increased by 12.3 per cent in comparison to the last financial year.

During the year, the report said, NBFC-MFIs received a total of Rs 57,307 crore in debt funding, a 35.7 per cent decrease from previous year.

Banks contributed 78.4 per cent of the total borrowing received followed by non-bank entities 11.9 per cent, ECB 5.1 per cent, All India Financial Institution 3.1 per cent and others 1.5 per cent, it said.

Total equity decreased by 1.8 per cent to Rs 35,759 crore as compared to previous year.

During the quarter ended March 31, 2025, Asset Under Management (AUM) of MFIs came down by 11.9 per cent to Rs 1,47,279 crore.

AUM decreased by 11.9 per cent compared to March 31, 2024 and decreased 2.4 per cent compared to December 31, 2024.

In terms of regional distribution of portfolio (AUM), East and North-East accounts for 33 per cent of the total NBFC-MFI portfolio, South 28 per cent, North 17 per cent, West 14 per cent, and Central contributes 9 per cent.

Last week, RBI Deputy Governor M Rajeshwar Rao said microfinance continues to suffer from the vicious cycle of over-indebtedness, high interest rates and harsh recovery practices.

While microfinance has played an important role in financial inclusion, some issues need attention, Rao had said.

"The sector continues to suffer from the vicious cycle of over-indebtedness, high interest rates and harsh recovery practices. While some moderation in interest rates charged on microfinance loans has been observed in recent quarters, pockets of high interest rates and elevated margins continue to persist," he had said. PTI DP DRR