Microfinance sector stabilizes after crisis with disciplined lending approach. India's microfinance market recorded month-on-month growth in February, with total loan portfolio reaching Rs 3.29 lakh crore, up 2.5% from January. After contracting nearly 28% from its March 2024 peak of Rs 4.43 lakh crore, the sector is now recovering through stricter underwriting standards and focus on higher-value loans. Large lenders are prioritizing customers with robust repayment histories rather than aggressive expansion. Portfolio quality improved significantly, with overdue loans declining 52 basis points to 2.8% for 30-179 day arrears. Industry leaders emphasize that future growth must be anchored in affordability, tighter credit filters, and technology-driven solutions to prevent repeat of overleveraging crisis that plagued the sector over the past two years.
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