Micro-Loan Delinquency Surges: Rural India Under Financial Stress, Reports Sa-Dhan
SDG 1: No Poverty | SDG 8: Decent Work and Economic Growth
Institutions: Ministry of Finance | Reserve Bank of India (RBI)
The latest Annual Bharat Microfinance Report (2025) and Quarterly Microfinance Report (QMR) by Sa-Dhan show a sharp increase in loan defaults, signalling growing financial stress among India’s small borrowers. The sector, while resilient—with a total outstanding loan portfolio growing by over 20% year-on-year (as of June 2024)—is grappling with rapidly worsening loan quality. The reports track the entire micro-loan portfolio, which is the total value of all small loans given out to low-income households.
The proportion of micro-loans that are overdue by more than 30 days (PAR 30+) has surged to 6.2% by the end of FY 2024-25, up significantly from 2.1% in the previous year. Even more concerning, loans deemed Non-Performing Assets (NPAs)—those overdue by 90 days or more—jumped to 4.8% from 1.6%.
The credit stress is concentrated in rural areas, where borrowers face higher delinquency rates (6.4% PAR 30+) compared to urban clients. Regional imbalance is severe, with Bihar showing the worst repayment performance, reporting a PAR 30+ rate of 7.2%, far exceeding the national average. The reports highlight that this is happening alongside rising funding costs (the cost for micro-lenders to borrow money) and declining profitability for many micro-lending institutions.
The rising delinquency levels signal that India’s rural and vulnerable populations are highly susceptible to economic shocks. This necessitates a proactive regulatory review by the RBI to enforce stringent loan monitoring, prevent over-indebtedness, and ensure the long-term sustainability of financial inclusion programs.
What is Portfolio at Risk (PAR 30+)? → PAR 30+ is the percentage of the outstanding loan portfolio for which loan payments are late by more than 30 days. It is the most common way to measure the risk and health of a microfinance lender’s loans, as a high PAR 30+ means more loans are at risk of never being fully repaid.
What is Sa-Dhan? → Sa-Dhan is India’s largest Association of Impact Finance Institutions and serves as a Self-Regulatory Organization (SRO) for the microfinance sector. Sa-Dhan’s main role is to develop, promote, and support inclusive finance institutions that provide services to low-income households, particularly women, to help them achieve stable livelihoods. It is recognized by the Reserve Bank of India (RBI) as a Self-Regulatory Organization for Non-Banking Financial Company-Microfinance Institutions (NBFC-MFIs). This means it helps oversee its members to ensure they adhere to regulations, follow an Industry Code of Conduct (CoC) for responsible lending, and prioritize client protection. It publishes the Annual Bharat Microfinance Report (BMR) and the Quarterly Microfinance Report (QMR) which are essential documents for policymakers, banks, and stakeholders to track the health and growth of the microfinance industry in India.
Follow the full report here: https://www.sa-dhan.net/wp-content/uploads/2025/08/Sa-Dhan-Annual-Report-2024-25-NEW.pdf