The write-off was part of a strategy to bite the bullet and be future-ready as the industry expects a turnaround in a quarter or two. The five publicly listed non-banking finance companies-microfinance institutions (NBFC-MFIs)—CreditAccess.
Grameen, Fusion Finance, Muthoot Microfin, Satin Creditcare Network and Spandana Sphoorty —cumulatively wrote off bad loans worth Rs 2,440 crore in the fourth quarter of FY25, compared with less than Rs 300 crore in the year-ago period. The idea is to begin the fiscal year by shedding the stickiest and ageing non-performing assets from the balance sheet. Writing off loans needs full provisioning against those accounts.
Accelerated write-offs require lenders to raise the provisioning level and take a larger hit on the profit and loss account.
“While challenges remain, the early signals are encouraging, showing a clear reversal,” said HP Singh, chairman of Satin, on a post-earnings analyst call. He noted that at times, only disruption can shake companies out of complacency and force a transformation. “This perfectly captures the spirit of FY25 — a year many in India’s microfinance sector might remember as a testing period, others as a wake-up call.” Satin was the sole listed NBFC-MFI that was profitable in all four quarters of FY25. Udaya Kumar Hebbar, managing director of CreditAccess Grameen, said on an analyst call, “The rising delinquency trend in the microfinance industry, which began in April 2024, peaked in November 2024, subsequently reversing till March 2025. We are already witnessing a new PAR (portfolio at risk) accretion rate largely getting normalised across all states, excluding Karnataka.” CreditAccess is the country’s largest NBFC-MFI.
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Gross non-performing assets (NPAs) before the technical write-off hit a record Rs 61,000 crore at the end of March, up from Rs 38,000 crore a year prior to that, as borrowers defaulted due to over-indebtedness.
The sector’s cumulative gross loan portfolio contracted by about 7% to Rs 3.81 lakh crore at the end of the March quarter, from the year earlier, as lenders slowed disbursement to prevent further loan losses.
Lenders write off loans when there is no realistic prospect of recovery. Accelerated write-offs contribute to elevated credit costs, impacting the profit and loss account. Recoveries against such written-off loans, if any, will get credited to the profit and loss statement.
The move was forced by growing customer overleveraging, crumbling of the joint liability model, rising staff attrition and disruptions in Karnataka and Tamil Nadu.
For instance, Fusion wrote off Rs 917 crore during the fourth quarter alone, nearly 40% of the cumulative write-offs by listed NBFC-MFIs. To put this into perspective, it had written off Rs 970 crore (net of recoveries) in the past 14 years before FY25.
Satin had never written off loans before FY25 despite repayment disruptions during events such as demonetisation and the pandemic.
Spandana, which is now under regulatory scrutiny for alleged misreporting and suppression of fraud, wrote off Rs 1,555 crore over the four quarters of FY25. “The MFI industry stood at a critical juncture, facing formidable challenges,” said Singh of Satin. “Institutions had to navigate a shifting landscape, clients experienced heightened vulnerability and the sector as a whole was compelled to rethink long-held assumptions.” It forced the sector to pause, reflect and reset, he said. “These disruptions served as a catalyst, driving deep introspection, operational recalibration and a renewed focus on fundamentals,” Singh said.
