CreditAccess Grameen Ltd Management Discussions

Management Discussion and Analysis

I. Microfinance Industry:

A Broad Perspective

A. Industry Overview: (Data as of March 31, 2026)

The Indian microfinance industry remains a critical enabler of financial inclusion, providing formal credit access to low-income and underserved households across rural and semi-urban India. Supported by strong regulatory oversight and the role of Self-Regulatory Organisations (SROs), the industry has navigated one of its most challenging periods in recent years. Despite the tough environment, the sector demonstrated resilience, supported by strong last-mile engagement and disciplined operating framework. The implementation of Guardrails by MFIN instilled a disciplined environment guided by stricter underwriting. The industry is positioned for measured and responsible growth in the coming years. Recognising the critical role played by microfinance institutions in advancing financial inclusion and supporting underserved households, the Government reiterated its support to the sector through a dedicated H20,000-crore credit guarantee scheme. This policy intervention came at an important juncture, as the industry transitions from a phase of correction toward measured revival, reinforcing confidence among several stakeholders.

As of March 31, 2026, the microfinance universe reported a total loan portfolio of H3.31 trillion, declining 11.7% YoY, with 10.7 crore active loan accounts. NBFC-MFIs continued to retain leadership with a 43.7% share of the industry GLP, followed by Banks at 26.4%, Small Finance Banks (SFBs) at 15.6%, NBFCs and others accounting for 14.3%. The sector is expected to gain strength supported by government guarantee scheme in FY27, further complemented by sectoral guardrails and expansion in under-penetrated regions.

The proportion of the portfolio serviceable under the MFIN guardrails increased significantly to 95.2% as of March 2026, compared with 87.8% a year earlier, indicating the effective implementation of these measures across the sector.

NBFC-MFIs remain the largest contributor to the microfinance industry, accounting for 43.7% of the total industry portfolio as of March 31, 2026. The segment reported a gross loan portfolio of H1.45 trillion, declining by 8.4% YoY. Despite the overall industry portfolio contracting by 11.7% YoY driven largely by banks scaling back their microfinance books, NBFC-MFIs demonstrated relative resilience, with a comparatively modest decline, resulting in a marginal gain in the market share.

Microfinance continues to serve as the stepping stone towards retailisation and provide formal credit at the last mile. Large segments of low-income households remain underserved, creating opportunities for responsible expansion, particularly through new-to-credit customers and under-penetrated districts.

Recent regulatory developments, including the reduction in qualifying asset requirements to 60% of total assets, provide greater flexibility to expand and diversify product offerings. This enables MFIs to design solutions aligned to the evolving lifecycle needs of customers including individual, secured, and supplementary products thereby increasing wallet share while maintaining prudent risk management.

The industrys growing emphasis on customer graduation architecture presents an opportunity to deepen long-term relationships by supporting customers as they evolve beyond group-based lending. Structured progression from group-based income-generation loans to higher-value individual and purpose-based products enhances customer lifetime value while reinforcing responsible borrowing practices.

Digital infrastructure and technology adoption offer a further avenue for operational efficiency and outreach. Investments in digital collections, app-based loan management, and deeper credit bureau integration can reduce turnaround times, improve underwriting quality, and lower servicing costs, enabling MFIs to serve a wider customer base sustainably.

Climate-protective and climate-adaptive financing represents an emerging opportunity for the microfinance sector. Increasing availability of climate-focused and ESG-linked funding allows MFIs to support resilient livelihoods through tailored credit solutions, insurance linkages, and community-focused interventions. With strong alignment to women-centric lending and multiple Sustainable Development Goals (SDGs), MFIs are well-positioned to attract impact-oriented capital.

The microfinance sector operates in close proximity to local communities, making it inherently sensitive to economic, social, and environmental disruptions. Factors such as agrarian distress, seasonal income volatility, natural calamities, and localised over-indebtedness can directly affect borrower repayment capacity and field operations. In the current environment, where asset quality pressures have already emerged across the industry, proactive risk monitoring and adaptive lending practices remain critical to preserving portfolio health.

Socio-political developments, including localised unrest, election-related disruptions, or administrative interventions, may affect field operations and customer engagement in affected areas.

Macroeconomic factors leading to higher inflation can impact borrower affordability while simultaneously increasing funding costs, compressing margins across the industry.

Operational challenges such as attrition among frontline loan officers may impact productivity and relationship continuity if not proactively addressed. Competitive intensity in mature markets and increasing reliance on digital platforms also necessitates sustained focus on cyber security, and data protection.

The Company continues to maintain a strong focus on serving rural and under-banked communities, with 87% of the borrower base comprising rural customers.Operating within 30-kilometre radius from each GL branch and 60-kilometre radius from each RF branch, contiguous district-based expansion strategy enables deeper penetration within familiar geographies, supporting stronger customer engagement and effective risk management. This sustained rural orientation aligns with the Companys objective of promoting financial inclusion while ensuring disciplined growth through proximity-driven operations.

As of March 31, 2026, the Company holds a 7.3% market share in the overall microfinance industry. The Companys market share across its top four states of business operations was 21.3% in Karnataka, 21.9% in Maharashtra, 10.9% in Tamil Nadu, and 10.8% in Madhya Pradesh. Within the NBFC-MFI segment, the Company preserved its position as the largest NBFC-MFI, with a 16.8% share of the total GLP.

The Company continues to follow the traditional Grameen model, with weekly Kendra meetings forming the cornerstone of customer engagement. These interactions go beyond collections and enable meaningful engagement with customers on financial literacy, responsible borrowing practices, etc. Regular, structured touchpoints have strengthened customer trust, experience, and long-term relationships, supporting higher retention and disciplined credit behaviour.

The Company abides by "Follow the Customer" philosophy in designing products, ensuring solutions remain aligned with customers lifecycle needs. The customers are onboarded through income generating loans and once credible history is established, other supplementary loans such as education, healthcare, home improvement are offered depending upon the need. The customers who graduate beyond group dynamics and demonstrate higher entrepreneurial capacity form part of the retail finance category where higher ticket-size individual and secured loans are offered. Responsible lending principles remain integral to product design, balancing customer affordability with portfolio sustainability.

Employee empowerment remains a key pillar of the Companys operating philosophy. A strong focus on employee well-being, inclusive workplace practices, continuous learning, and structured career progression supports a motivated and engaged workforce. The five-day work policy, internal mobility opportunities, and leadership connect initiatives reinforce work-life balance and professional growth. Reflecting this sustained focus, the Company was recognized as a "Great Place to Work" for the seventh consecutive year, underscoring its strong people-centric culture.

The Company is guided by a seasoned and stable leadership team with deep operational experience and long-standing association with the organisation. The leaderships strong understanding of grassroots operations, combined with disciplined governance and risk oversight, enables effective navigation across business cycles. This continuity in management provides strategic direction, operational resilience, and consistency in execution aligned with long-term value creation objectives.

Aligned with the evolving credit needs of customers and the Companys customer graduation framework, Grameen Vishesh Loan was introduced during the year under the retail finance portfolio with loans up to H175,000. This is an individual unsecured business loan offered to graduated group lending customers. These loans act as an essential bridge to move customers towards the retail finance fold.

Technology plays a key role in enhancing operational efficiency and customer engagement. The Company actively leverages Low-Code/No-Code platforms to develop modular solutions aligned with evolving business needs, supported by a robust integration architecture using an Enterprise Service Bus to enable secure interoperability across systems and partner platforms. Our unified field application, Grameen Maitri, supports end-to-end management of the customer lending lifecycle, and was extended during the year to include loan collections, complemented by interactive dashboards for improved operational visibility. During FY26, the Company initiated the establishment of an AI Innovation Hub focused on select GenAI-based use cases, with initial initiatives including role-based chatbots for field executives and leadership teams to support information access and operational decision-making. Robotic Process Automation (RPA) is embedded across workflows to automate routine tasks, enabling field teams to focus on customer engagement and value-enhancing activities.

The Company opened 183 new branches in FY26 across Andhra Pradesh (35 branches in 20 districts), Chhattisgarh (5 branches in 4 districts), Gujarat (9 branches across 6 districts), Karnataka (19 branches in 14 districts), Madhya Pradesh (26 branches in 21 districts), Maharashtra (30 branches in 21 districts), Rajasthan (4 branches in 3 districts), Tamil Nadu (8 branches in 8 districts), Telangana (8 branches in 7 districts), Uttar Pradesh (14 branches in 9 districts), and West Bengal (25 branches in 13 districts). The branch expansion was in line with the companys contiguous district-based expansion strategy, primarily focusing on new geographies.

The Companys doorstep credit delivery model enables access to formal finance for underserved customers, supporting the establishment of credit history through relationship-based lending. The group lending methodology, built on mutual trust and collective responsibility, promotes disciplined borrowing and repayment behaviour.

A healthy borrower vintage profile indicates true financial inclusion, with new customers being onboarded on a continuous basis and existing customers being supported across their credit lifecycle. The details of borrower vintage are mentioned below:

For the period ended March 31, 2026, the Companys pre-provision operating profit grew 6.5% to H 28,085.95 million as against H 26,383.83 million during the same period in the previous year. The Companys profit after tax for FY26 stood at H 7,776.38 million as against H 5,313.98 million for the previous year, an increase of 46.3%. Total revenue from operations for FY26 grew at 5.3% to H 60,625.38 million as against H 57,561.42 million during the same period in the previous year. Total expenses stood at H 50,293.42 million as compared to H 50,472.69 million during the same period in the previous year, a decrease of 0.4%.

For FY26, the portfolio yield remained steady at 20.6%, in line with the previous financial year. The cost-to-income ratio for FY26 stood at 32.5% as against 30.7% in FY25. The operating cost to Gross Loan Portfolio ratio for FY26 stood at 5.1% compared to 4.5% during the previous financial year.

The changes in the outstanding borrowings from different sources during FY2026 in comparison to previous years can be seen in the below table:

The Companys treasury and cash management framework supports funding requirements, liquidity planning, and efficient cash deployment. Treasury operations cover borrowing arrangements, lender engagement, centralized monitoring of cash and bank balances, pooling of surplus funds, debt servicing, and execution of vendor and employee payments. Liquidity positions and maturity profiles are periodically reviewed in line with internal policies and regulatory guidelines to ensure financial stability and uninterrupted operations.

( H in millions)

*CAGR is calculated for the change during the last 4 years

Our strong borrower retention rate is a testament to our approach of creating entrepreneurs by providing them with suitable and affordable products as we continue to foray into the hinterlands.

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.

State wise Borrowers Distribution

(In J Million)

Number of Districts – District Exposure As % of Gross AUM

Number of Districts – District Exposure As % of Borrowers

Our human capital strategy remained focused on building a high-performing, inclusive, and resilient workforce. During the year, we continued to invest in frontline capability building, employee well-being, and structured career progression, given that our people are the primary interface between the Company and the communities we serve. Equal-opportunity employment, safe workplace conditions, and transparent grievance redressal mechanisms remained central to our workplace practices. Initiatives around childcare support, health and wellness, and flexible working arrangements reinforced our commitment to retention and employee welfare across all levels. Underpinning these efforts, the phased implementation of an integrated HRIS platform enabled real-time visibility into key workforce metrics, supporting more proactive planning and evidence-based decision-making across the organisation.

21,941 permanent employees as on March 31, 2026 with FY26 attrition rate of 29.4% Vs in 33.5% in FY25

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

Learning and development continues to be a critical pillar in building a high-quality workforce, especially within field operations. During FY26, the Company provided training across multiple modules including Operational Process, Behavioral Skills, Anti Sexual Harassment, Anti Bribery & Corruption, Malicious Software & Phishing Awareness and Product Expansion. The structured training programs helped strengthen operational capabilities, reinforce compliance, and enhance customer engagement quality.

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

I. Internal Controls and its adequacy

CA Grameen operates a structured internal control framework designed to ensure process integrity, regulatory compliance, and operational efficiency across all business units. The system is built on a well-defined three-line defence model, enabling effective monitoring and timely identification of control gaps. Digital audit tools and system-driven reviews support evidence-based assessments, geo-tagged verification, and real-time visibility into field-level operations. Risk-based audits, thematic reviews, and periodic supervisory checks strengthen oversight and reinforce adherence to policies and procedures. Competency standards across audit teams were further reinforced through an annual self-assessment and certification exercise, embedding professional discipline as an ongoing practice rather than a periodic requirement. Standardised workflows, documented processes, and data-driven insights contributed to reliable financial reporting and robust operational governance.

The Company follows a well-defined risk management framework covering credit, operational, market, and liquidity risks. A rule-based underwriting process supported by analytics helps maintain credit discipline, while early-warning indicators and field-level monitoring ensure timely identification of stress. Operational risks are managed through system-driven checks, geo-tagged validations, and periodic audits. Technology and data-security controls support secure operations and business continuity. A Single Sign-On framework with two-factor authentication is being piloted to further strengthen identity and access management across platforms. Funding, liquidity, and ALM positions are reviewed through regular stress assessments to ensure stability under varying market conditions. The framework remains aligned with regulatory expectations and the Companys operating model.