What is the current status of overleveraged borrowers in India's microfinance sector?

As of November 2025, loans to borrowers with multiple lenders have significantly decreased to Rs 30,494 crore, with the number of such borrowers falling to 2.8 million.

How have microfinance regulations impacted borrowers in India?

Industry regulations have led to fewer borrowers taking loans from multiple lenders, improving sector stability but causing initial cash flow issues for some.

When is the microfinance sector expected to fully turn around in India?

The microfinance sector is expected to see a significant turnaround in business volume by the end of the 2025-26 fiscal year.

Home / Business and Economy / Microloans Get Healthier: Overleveraged Borrowers Plummet

Microloans Get Healthier: Overleveraged Borrowers Plummet

24 Nov

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Summary

Loans to borrowers with multiple lenders fell to Rs 30,494 crore.
Number of overleveraged borrowers dropped to 2.8 million.
Lenders' stricter practices improved sector stability by November 2025.

Microloans Get Healthier: Overleveraged Borrowers Plummet

The Indian microfinance sector is undergoing a positive transformation, marked by a substantial reduction in overleveraged borrowers. Loans extended to individuals indebted to four or more lenders have dropped significantly to Rs 30,494 crore, representing 8.8% of the total market as of November 2025, a sharp decrease from 16.9% a year prior. This consolidation is attributed to industry regulations and guardrails implemented to mitigate risk.

The number of borrowers with multiple loans has also seen a steep decline, falling to 2.8 million by November 2025 from 5 million a year ago. This trend reflects a conscious effort by lenders to avoid repeat lending to highly indebted individuals. While these stricter practices have improved the overall health of the microfinance business, they have also led to initial cash flow challenges for some borrowers.