ICRA has revised the NBFC-MFI sector outlook to Stable from Negative, reflecting improving asset quality indicators and the expected recovery in growth and profitability. NBFC-MFI portfolio growth resumed in Q1 FY2027, supported by the recovery in disbursements and higher ticket sizes. ICRA forecasts AUM growth of 20-25% for FY2027. Profitability is expected to improve in FY2027 as credit costs moderate, although suboptimal rainfall, moderating rural wage growth and uneven funding access across entities remain key monitorable.

• NBFC-MFI AUM increased by around 5% YoY to Rs. 1.44 lakh crore in June 2026, reflecting the ongoing recovery. ICRA expects AUM growth of 20-25% in FY2027, supported by improving collections, disbursements and portfolio diversification.

• Q1 FY2027 disbursements rose by around 22% YoY for NBFC-MFIs and 9% for the overall industry. NBFC-MFI growth was supported by the recovery in disbursements and higher ticket sizes.

Exhibit: Growth (YoY) trend of AUM of NBFC-MFIs

Source: Data from NBFC-MFIs, MFIN, ICRA Research; NBFC-MFIs’ AUM growth is on YoY basis; P – Projected