Steep decline in Tamil Nadu
Decline of Microfinance GLP in Tamil Nadu during Q1 FY26: At the end of June 2025, the microfinance gross loan portfolio (GLP) in Tamil Nadu fell to ₹43,700 crore. Compared to the ₹57,100 crore recorded in June 2024, this marks a 23.5% decline in a single year.
On a quarter-to-quarter basis, the portfolio also slipped 6.7%, down from ₹46,800 crore at the close of March 2025. This signals mounting challenges for microfinance institutions in the state.
Static GK fact: India is home to over 6 million self-help groups, many of which are linked to microfinance networks.
Legislative impact
In June 2025, the Tamil Nadu Money Lending Entities (Prevention of Coercive Actions) Act, 2025 was officially enforced. This act prohibits the use of coercion in loan recoveries and extends its provisions to NBFCs regulated by the Reserve Bank of India, along with co-operative banks and credit societies.
While the legislation strengthens borrower protection, it has also restricted the risk appetite of lenders, slowing the pace of credit expansion.
Static GK Tip: Co-operative banks operate under the dual regulation of the RBI and the Registrar of Co-operative Societies.
Position of financial institutions
Among the lenders in Tamil Nadu, Muthoot Microfin manages a loan portfolio of about ₹3,200 crore. The institution, like its peers, faces stress due to the combination of reduced demand and stricter compliance frameworks.
Smaller microfinance companies with limited resources are more vulnerable to the ongoing downturn.
Situation across states
Tamil Nadu’s decline reflects a broader national pattern. Except West Bengal, all major states recorded double-digit falls in their microfinance GLP during June 2025.
Odisha experienced the sharpest contraction at 24.7%, while Tamil Nadu followed at 23.5% and Karnataka at 22.9%. These numbers highlight that the sector’s weakness is widespread across regions.
Static GK fact: The Microfinance Institutions (Development and Regulation) Bill was introduced in 2012 but has not yet been passed in Parliament.
Outlook ahead
The sharp reduction in GLP shows the difficulty of balancing borrower safeguards with the growth needs of microfinance institutions. Stronger regulations have reduced exploitation risks but at the same time discouraged credit expansion.
Future growth depends on building responsible lending systems, boosting financial awareness among rural borrowers, and increasing adoption of digital lending platforms to improve transparency and efficiency.
Static Usthadian Current Affairs Table
Decline of Microfinance GLP in Tamil Nadu during Q1 FY26:
| Topic | Detail |
| Tamil Nadu GLP June 2025 | ₹43,700 crore |
| Year-on-year fall | 23.5% |
| GLP last year (June 2024) | ₹57,100 crore |
| QoQ fall | 6.7% from March 2025 |
| Key law notified | TN Money Lending Entities Act 2025 |
| Coverage of Act | NBFCs, co-operative banks, societies |
| Muthoot Microfin portfolio in TN | ₹3,200 crore |
| Odisha GLP fall | 24.7% |
| Tamil Nadu GLP fall | 23.5% |
| Karnataka GLP fall | 22.9% |
