May 8 (BNP): India’s microfinance sector is showing signs of recovery, with the overall portfolio increasing to Rs 3.31 lakh crore in the latest quarter, according to a recent industry report. The sector recorded a 3.2 per cent quarter-on-quarter growth, reflecting improving lending activity and gradual stabilization in borrower demand.

The rebound indicates renewed momentum in the microfinance industry after a period of cautious lending and operational challenges faced by several institutions. Improved collections, stronger rural economic activity, and rising credit demand have contributed to the sector’s steady recovery.

Industry observers say microfinance institutions are becoming more selective in lending while focusing on portfolio quality and customer engagement. The growth also highlights continued demand for small-ticket loans among low-income households and small entrepreneurs, particularly in rural and semi-urban regions.

The report noted that lenders are closely monitoring repayment trends and risk management practices as the sector continues to stabilize. Financial institutions are also increasing efforts to strengthen digital operations and improve credit assessment processes.

Experts believe the recovery in the microfinance portfolio reflects growing economic resilience at the grassroots level, supported by improved income generation and consumption activity across several regions.

While challenges such as inflationary pressure and borrower stress remain areas to watch, the sector is expected to maintain gradual growth momentum in the coming quarters as credit demand improves and financial inclusion efforts expand further.