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Inflationary pressures likely to impact repayment behaviour of microfinance borrowers: Crisil
Jun-23-2026

Crisil in its latest report has said that risks such as possible inflationary pressures or reduction in discretionary household cash flows may influence the repayment behaviour of microfinance borrowers, despite no direct impact from the West Asia conflict on the sector. The report also said that the impact of the El Nino phenomenon on rural incomes will bear watching. Further, the report stated that states like Karnataka, Tamil Nadu, and Bihar have enacted introduced legislations for tighter oversight on unregulated microfinance lending practices, including enhanced borrower protection norms, restrictions on recovery practices and stricter compliance guidelines.

As per report, Karnataka experienced a moderation in collections, with efficiency declining by 5-6 per cent soon following the implementation of the state's microfinance ordinance in February 2025. However, the report said Tamil Nadu and Bihar did not exhibit any material impact on collections as lenders were able to incorporate learnings from the Karnataka experience and adapt their operational approaches accordingly.

Besides, the report said that the collections of microfinance securitised pools has improved sharply after the implementation of guardrails on new loan originations. Pools originated thereafter reported a 60 per cent reduction in overdue build-up at 1.6 per cent, ten months after securitisation, compared to 3.7 per cent for the pools originated during the stress period of fiscal 2025.

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