Banks’ share in the outstanding loans provided to microfinance companies has declined from 40% in September 2021 to 31% in September 2023. During this period, non-banking finance companies (NBFCs) and small finance banks (SF banks) have gained market share, surpassing banks. Microfinance companies had initially faced a credit crunch due to the pandemic, resulting in a decrease in their market share. However, in the past two years, they have made a strong comeback, growing faster than the industry. While banks and SF banks witnessed a growth of only 19% and 77% respectively, MFIs experienced a substantial growth of 86%. According to a report by CRIF Microlend, banks had outstanding loans of Rs 1.2 lakh crore to the microfinance sector. On the other hand, microfinance institutions had a loan book of nearly Rs 1.5 lakh crore, while SF banks had Rs 72,873 crore as of September 2023. Comparatively, in September 2021, banks had a portfolio of a little over Rs 1 lakh crore, MFIs had Rs 79,595 crore, and SF banks had Rs 41,158 crore. MFIs primarily focus on small-ticket loans for individuals at the bottom of the pyramid, and these loans qualify as a priority sector for banks. Many SF banks were originally MFIs that later obtained a banking license. The gross loan portfolio has increased by 26% to Rs 3.8 lakh crore as of September 2023 from Rs 3 lakh crore two years ago.