Rural India drives microfin growth as NBFCs shift focus – News Air Insight

Kolkata: Rural contribution to the microfinance business of non-bank lenders increased to about 80% in 2024-25, its largest share since 2011 when the Reserve Bank of India started regulating the market.

In 2023-24, the share of rural areas in their microfinance business was 76%, data from Sa-Dhan Bharat Microfinance Report 2025 showed.

This signals a drop in urban lending as non-bank microfinance firms are focusing more on rural areas for new businesses, as these areas fare better in repayment rates than urban parts of the country. The longer-term delinquency measured by 180+ DPD (over 180 days past due) was seen at 11.5% for rural loans against 14.9% for urban loans for the entire microfinance stack.

“This shift aligns with the demographic structure of India, where nearly 80% of the population still resides in rural regions. Smaller micro lending institutions have typically been rural-centric, though a few have focused exclusively on urban markets,” said the report.

When private banks and small finance banks are included in the scheme of things, then rural contribution to the overall microfinance market comes down to 61% of the sectoral gross loan of ₹3.81 lakh crore, reflecting banks’ strong urban-centricity.

In 2019, before the onset of Covid-19, the share of rural microfinance was barely 55%. Urban business overtook rural contribution in 2014 and remained ahead till mid-2016, before the transition of several urban-centric micro lenders into small finance banks. In 2011, 62% of the clients were in rural and semi-urban localities while their share in terms of value is not available.The gross loan portfolio of non-bank micro-lending institutions stood at ₹2.38 lakh crore at the end of 2024-25. Rural areas accounted for ₹1.88 lakh crore, representing 79% of the total gross loan book, while the urban gross loan book was at ₹50,022 crore, accounting for the remaining 21%.