CreditAccess Grameen Ltd Management Discussions

I. Microfinance Industry: A Broad Perspective

A. Industry Overview: (Data as of March 31, 2025)

The financial sector in India continues to play a vital role in the countrys economic growth, driven by the steady supply of credit across industries. Strong regulatory oversight and timely policy interventions have further reinforced the sectors resilience, ensuring stability amid evolving economic conditions. Within this dynamic landscape, the microfinance industry serving the underserved and financially excluded segments has demonstrated remarkable tenacity. Despite a challenging year with multiple headwinds, microfinance institutions (MFIs) have continued to provide essential financial services at the grassroots level, aligning with the national goal of equitable development and financial empowerment for all. Self-Regulatory Organisations (SROs) played a pivotal role as the industry collectively addressed on-ground challenges, culminating in the phased introduction of MFIN Guardrails 1.0 and 2.0, striking a crucial balance between operational integrity and advancing financial inclusion.

The Indian microfinance industry witnessed a de-growth of 13.5% YoY in gross loan portfolio to Rs. 3.75 trillion, catering to 78 million unique borrowers at the end of March 2025. The NBFC-MFI segment continued to lead the sector with a 39.3% share of the universe portfolio, followed by Banks at 32.8%, SFBs at 15.8%, and NBFCs/Others at 12.1%. A total of 212 lending institutions served microfinance borrowers – 93 NBFC-MFIs, 17 Banks, 10 SFBs, and 92 NBFCs across the country. The industry is on track for a robust recovery in FY26, anchored by the positive influence of MFIN Guardrails. These measures are fostering stronger compliance and operational discipline across institutions. As a result, the sector is expected to shift toward more balanced growth while continuing to serve unserved and underserved communities.

Reflecting the broader industry slowdown, NBFC-MFIs, the market leaders, recorded a 13.7% YoY drop in Gross Loan Portfolio to Rs. 1.48 trillion, and a

5.1% YoY decline in the borrower base to 3.7 million. During FY25, a total of 1.09 trillion was disbursed by the NBFC-MFIs, a 27.5% YoY decline compared to the same period last year.

MFIs grew their branch presence spread across the country by 13.4% YoY to 24,523, providing employment opportunities to 230,547 people. The self-reported data of 48 NBFC-MFIs published in the MFIN Micrometer is categorised as Large, Medium, and Small according to their GLP. Companies with a GLP of more than Rs. 20,000 million fall in the large category whereas companies having a GLP between 5,000 million to 20,000 million and GLP of less than 5,000 million are categorised as medium and small entities respectively. Accordingly, there are 15 large, 10 medium, and 23 small entities operating, of which 90.5% of the NBFC-MFI segment portfolio is held by large entities.

Top Ten MFIs GLP contribute to 74.4% of the NBFC-MFI segment. As of March 31 2025, rural portfolio contribution stood at 83.3%.

Reflecting deep rural presence, agri-allied loans formed 66.0% of the GLP, followed by trade/manufacturing at 27.9% and household finance at 6.1%.

Region-wise distribution of the portfolio is provided below.

South : 28%

West : 14%

North : 16%

Central : 9%

East and North-East : 33%

Top 5 States - Bihar, Uttar Pradesh, Tamil Nadu, Karnataka and Maharashtra account for 58.4% of GLP. The top 10 States account for 84.6% of the total industry loan amount outstanding.

86% of our borrower base came from rural areas at the end of March 2025, reflecting our continued commitment to underserved communities lacking formal credit access. Guided by our strategy of contiguous district-based expansion, we operate within a 30-kilometre radius from each branch, enabling deep community engagement.

As of March 31, 2025, the Company holds a 6.9% market share in the overall microfinance industry. The Companys market share across its top four states of business operations was 23.0% in Karnataka, 19.3% in Maharashtra, 10.5% in Tamil Nadu, and 9.8% in Madhya Pradesh. Within the NBFC-MFI segment, the Company preserved its position as the largest NBFC-MFI, with a 17.6% share of the total GLP.

We continue to follow the traditional Grameen model with the weekly Kendra meeting model, holding customers at the core of our business operations and prioritizing regular customer interaction. This approach has proven to enhance customer experience, satisfaction, and retention over the years. Along with repayment collection, we engage with customers on essential topics such as financial literacy, responsible borrowing practices, hygiene, legal rights, etc. Digital programs like Jagruti and Social Awareness Campaigns further enhance customers awareness.

Following our "Evolve with customer" principle, we offer a diverse range of products and services to meet evolving lifecycle needs. Commencing with income-generating loans, we lay the foundation for financial discipline under group dynamics, expanding further to supplementary, education, home improvement, medical emergencies, water, and sanitation loans. For customers advancing to the next stage, we offer individual unsecured, two-wheeler, secured business, and affordable housing loans. Promoting responsible lending remains our essence and is embodied while designing products.

Employee empowerment is a foundational pillar of CA Grameen. Our continued adherence to a five-day work policy reflects our commitment to fostering well-being and balance. At the centre of our ethos is our culture champions (seasoned professionals) who transmit our core values across as we expand our footprint. We cultivate a culture of ownership, where individuals are encouraged to take charge of their growth and transform potential into high performance. Our flexible transfer policy further reinforces this inclusivity, while active mentorship from senior leadership nurtures continuous professional and personal development.

A seasoned and stable leadership team guides the company towards long-term growth. With decades of continued association, our business heads have navigated all phases of the business cycle, bringing a nuanced understanding of industry dynamics.

Driven by strong operational controls and rich experience, the company remains well-positioned to respond to evolving macroeconomic shifts, capitalize on emerging opportunities, and drive sustained performance.

Microfinance functions as an antidote to rural credit deficit in the country, given its strong penetration levels at nearly 45%, significantly focusing on the population at the bottom of the social pyramid. This financial access consequently promotes equality and economic growth.

The industry over the years has pioneered the capability to adapt to a dynamic technology-driven environment. By supporting digital inclusion agenda in rural areas, it has empowered underserved communities. Through innovative solutions, the industry connects Bharat, driving economic growth, and creating new opportunities for millions who were previously excluded from mainstream finance.

Guided by MFIN guardrails and regulatory oversight, ensures compliance and reinforces operational integrity. With the implementation of strong policies and legal compliance, MFIs are better equipped to navigate industry challenges, contributing to the countrys financial inclusion goals and driving long-term, sustainable economic growth.

The implementation of strong ESG practices presents a unique opportunity for MFIs to attract global lenders offering ESG-dedicated funding. With a women-centric focus and alignment with multiple SDGs, MFIs possess a natural edge in this space. Their widespread presence in underserved communities further strengthens their appeal, positioning them as key players in sustainable development financing.

The key to staying relevant and responsive to evolving financial needs lies in microfinance institutions adopting a balanced approach of high-tech and high-touch. As clients increasingly lean towards digital financial solutions, fostering value-driven relationships beyond collections becomes essential. By combining constant client interaction with a technology-driven approach, the industry can effectively meet demands while ensuring personalized and impactful service.

Continuous climate change is driving shifts in temperature, extreme weather events, beyond just rain patterns. These changes affect agriculture, water resources, and human livelihoods, requiring urgent adaptation and mitigation strategies to safeguard vulnerable communities. Microfinance has established itself as an important enabler of climate adaptation, serving as a critical tool to stabilize income streams, particularly during challenging times. By offering essential support in the form of credit and CSR, it helps individuals and communities navigate economic adversity.

Bank funding has played a significant role in the expansion of MFIs portfolios over the past several years. However, relying solely on a single source introduces risks and limits flexibility. By diversifying funding through a combination of domestic and international sources, MFIs can mitigate these risks, lower costs, and gain broader access to global capital, ensuring greater financial sustainability. Sustainable growth in the microfinance sector lies in expanding the customer base. Efforts should focus on attracting new and first-time credit customers to drive future growth. A risk-based pricing approach will help retain existing customers, attract new ones, and ensure regulatory compliance, benefiting the industry in the long run.

Driven by our customers growth, we continue to innovate with solutions that support their progress. On the non-credit side, weve introduced a unique group savings micro-insurance plan. With small, regular contributions, customers can build a financial safety net for themselves and their families. The plan includes a fixed-term savings component of 3 to 5 years, encouraging disciplined financial planning.

For customers with existing Unnati Loans, we now offer Grameen Unnati Supplementary Loans of up to RS. 75,000. These additional loans are tailored to support short-term financial needs, enhancing access to timely credit and strengthening the financial resilience of our members.

Operational efficiency and digital readiness are central to succeeding in todays financial landscape. Our integrated platform, Grameen Maitri, is aimed at connecting each stage of the lending process. With its comprehensive loan management capabilities now fully deployed across all branches, it significantly boosts the productivity and efficiency of our front-line teams. Robotic Process Automation (RPA) is now a standardized operational function, streamlining routine tasks. The Business Rule Engine (BRE) has been further strengthened to support sharper credit decisions and reinforce policy adherence. In parallel, we have upgraded our core infrastructure with high-performance processors, fast-access storage, and advanced networking solutions.

The Company opened 100 new branches in FY25 across Andhra Pradesh (16 branches in 10 districts), Goa (1 branch in 1 district), Karnataka (22 branches in 18 districts), Madhya Pradesh (10 branches in 9 district), Maharashtra (13 branches in 11 districts), Tamil Nadu (2 branches in 2 districts), Telangana (6 branches in 6 districts), Uttar Pradesh (14 branches in 10 districts), and West Bengal (16 branches in 7 districts). The branch expansion was in line with the companys contiguous district-based expansion strategy, primarily focusing on new geographies.

Our doorstep credit delivery model serves as an entry point for many borrowers to enter the formal credit system, enabling them to build credit history. Through relationship-driven engagements, we build trust that lays the foundation for vintage borrowers. As their credit needs evolve, our customized solutions drive retention and lifetime value. The details of the borrower vintage are mentioned below:

For the period ended March 31, 2025, the Companys pre-provision operating profit grew 10.3% to Rs. 26,377.68 million as against Rs. 23,909.54 million during the same period in the previous year. The Companys profit after tax for FY25 stood at Rs. 5,313.98 million as against Rs. 14,459.28 million for the previous year, a decrease of 63.2%. Total revenue from operations for FY25 grew at 11.3% to Rs. 57,561.42 million as against Rs. 51,726.52 million during the same period in the previous year. Total expenses stood at Rs. 50,472.69 million as compared to Rs. 32,334.68 million during the same period in the previous year, an increase of 56.1%.

As of March 31, 2025, the portfolio yield stood at 20.6% as against 20.9% during the same previous financial year. The cost-to-income ratio at the end of March 2025 was 30.7% as against 30.5% during the same period in the previous year. The operating cost to Gross Loan Portfolio ratio for FY25 remained unchanged at 4.5% compared to the previous financial year.

The changes in the outstanding borrowings from different sources during FY2025 in comparison to previous years can be seen in the table below:

The Company has an integrated Treasury and Cash Management system that secures funds from multiple sources, operates the complete cash/bank transactions, maintains strong relationships with the industry players and regulators, handles pooling of excess funds from branches and funding disbursement, debt repayment, payments to vendors, employees for salaries, and investment of surplus funds, if any.

(Rs. in millions)

1) Since there was a loan moratorium applicable during Apr-20 to Aug-20, FY21 repayment rate is calculated over Sep-20 to Mar-21 *CAGR is calculated for the change during the last 4 years

Our average borrower retention rate of 87% in the past 5 years reflects the effectiveness of our approach in supporting women entrepreneurs. Through our ongoing commitment, we continue to foster opportunities for women, ensuring they have access to the resources needed for lasting impact and continued progress.

The Company has an operational presence in Karnataka (KA), Maharashtra (MH), Tamil Nadu (TN), Madhya Pradesh (MP), Odisha (OD), Bihar (BR), Chhattisgarh (CG), Kerala (KL), Jharkhand (JH), Rajasthan (RJ), Gujarat (GJ), Uttar Pradesh (UP), West Bengal (WB), Puducherry (PY), Goa (GA), Andhra Pradesh (AP) and Telangana (TL). Our expansion approach is centered around a contiguous district strategy enabling cultural familiarity.

We believe in equal-opportunity employment, promoting gender-balanced work culture, and fair employment opportunities. Our company upholds the commitment to employee well-being and reinforces a culture of trust and accountability. Several initiatives centering employee health, safety, and skill development like regular health check-ups, yoga sessions, leadership training, technical and behavioral training have been prioritized for developing a healthy work environment. We also focus on employee mental well-being by providing in-person training on stress management and healthy lifestyle practices.

20,970 permanent employees as on March 31, 2025 with an attrition rate of 33.5%

No unresolved concerns under labor compliances, sexual harassment, and disciplinary issues

Training and talent development play a crucial part in nurturing our employees. Our in-house training effectively helps employees to increase their potential on a personal and company level. Significant focus is provided on training related to Client Protection, Code of Conduct, Anti Sexual harassment policy, and Phishing Awareness.

Details on some of the training programs provided to employees are as follows:

CA Grameens internal control framework is fundamental to ensuring compliance and safeguarding the integrity of our operations. Our three-line defense model empowers us to consistently monitor performance, improve processes, and uphold the highest operational standards across the organization. Through AuditNex, our proprietary audit platform, we ensure real-time data, geo-tagged evidence, and analytics-driven insights streamline audits, enhancing productivity and aligning internal audit firmly with business operations.

The company encompasses a structured risk management system for accurate credit evaluation and responsible lending. Automation within our operational risk framework boosts compliance and efficiency. Additionally, our Early Warning Risk Management System proactively flags field irregularities through granular data analysis and real-time alerts. These initiatives strengthen fraud detection, ensuring swift intervention.