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Government Intervention Becomes Necessary as India's Microfinance Sector Contracts

India's Microfinance Shrinks: Government Steps In With ₹20,000 Crore Scheme

L&T Finance | The stock was an outperformer in 2025 and Nomura expects the stock to rise another 19.5% from current levels. Its "buy" rating comes with a price target of ₹325. Nomura's note stated that L&T Finance has nearly achieved its objectives highlighted in "Lakshya 2026" which is to increase its retail loan mix to 95% and a 25% CAGR in retail loans in 2026. It also said that L&T Finance has built commendable AI engines for underwriting and monitoring and it is already showing early signs of improvement in its asset quality. Macro events impacting rural customer base, disruption in AI engines and changes in management team driving AI are key downside risks.

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CNBC TV18•23-03-2026, 13:16

India's Microfinance Shrinks: Government Steps In With ₹20,000 Crore Scheme

•India's microfinance industry has shrunk, prompting the government to launch a ₹20,000 crore credit guarantee scheme.
•Banks have reduced microfinance lending, ceding market share to shadow banks and preferring borrowers with good track records.
•The total microfinance portfolio outstanding dropped 22% year-on-year to ₹2.69 lakh crore by December 2025, despite a recent rise in disbursements.
•Risk aversion has led to over half a million small borrowers losing access to formal credit, with lenders focusing on existing clients.
•Loan sizes are increasing, with the average ticket size rising 16% to ₹61,253, indicating a shift towards higher-value lending.

Read Full Article on CNBC TV18 in English

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L&T Finance | The stock was an outperformer in 2025 and Nomura expects the stock to rise another 19.5% from current levels. Its "buy" rating comes with a price target of ₹325. Nomura's note stated that L&T Finance has nearly achieved its objectives highlighted in "Lakshya 2026" which is to increase its retail loan mix to 95% and a 25% CAGR in retail loans in 2026. It also said that L&T Finance has built commendable AI engines for underwriting and monitoring and it is already showing early signs of improvement in its asset quality. Macro events impacting rural customer base, disruption in AI engines and changes in management team driving AI are key downside risks.

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L&T Finance | The stock was an outperformer in 2025 and Nomura expects the stock to rise another 19.5% from current levels. Its "buy" rating comes with a price target of ₹325. Nomura's note stated that L&T Finance has nearly achieved its objectives highlighted in "Lakshya 2026" which is to increase its retail loan mix to 95% and a 25% CAGR in retail loans in 2026. It also said that L&T Finance has built commendable AI engines for underwriting and monitoring and it is already showing early signs of improvement in its asset quality. Macro events impacting rural customer base, disruption in AI engines and changes in management team driving AI are key downside risks.

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