Chapter 4 - Section 4.3 - SubSection 4.3.2.iYield on Loan Portfolio

Portfolio yield is an important indicator of the revenue-generating capacity of the microfinance portfolio and provides insight into the relationship between lending operations, pricing and institutional sustainability. It reflects the income generated from the loan portfolio and is influenced by factors such as interest rates, portfolio composition, borrower repayment patterns and changes in lending practices. Tracking portfolio yield over time helps assess how the sector has responded to changing market conditions, regulatory developments and the growing emphasis on responsible lending.

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Figure 4.3.6: Yield Trend of MLIs

Figure 4.3.7: Yield on Portfolio across MLIs

4.3.2.i Yield on Loan Portfolio

Portfolio yield is an important indicator of the revenue-generating capacity of the microfinance portfolio and provides insight into the relationship between lending operations, pricing and institutional sustainability. It reflects the income generated from the loan portfolio and is influenced by factors such as interest rates, portfolio composition, borrower repayment patterns and changes in lending practices. Tracking portfolio yield over time helps assess how the sector has responded to changing market conditions, regulatory developments and the growing emphasis on responsible lending.

Figure 4.3.6: Yield Trend of MLIs

The trend indicates that the yield/return from the microfinance portfolio remained relatively stable at around 20% during 2017–20, before declining sharply during the pandemic period to 16.8% in 2020–21 and 16.5% in 2021–22. It recovered strongly thereafter, reaching 20.65% in 2022–23 and 20.76% in 2023–24. Since then, the ratio has moderated to 19.18% in 2024–25 and 18.54% in 2025–26. The recent decline of 64 basis points in 2025–26 suggests some moderation in portfolio yield, potentially reflecting changes in portfolio mix, pricing, competitive conditions and the increasing emphasis on responsible lending under the RBI’s principles-based pricing framework for microfinance loans, which requires institutions to set rates through a board-approved policy rather than a prescribed cap. Alongside rising operating costs and relatively stable finance costs, the lower yield could put pressure on institutional margins. However, the current level remains above the pandemic-period lows, indicating that the sector continues to generate a relatively stable return from its core lending portfolio.

Figure 4.3.7: Yield on Portfolio across MLIs

The 2026 portfolio yield shows a clear relationship with institutional scale, with larger institutions generally reporting higher yields. The overall yield stands at 18.54%, while institutions below ₹100 crore record 16.43% and those in the ₹100–500 crore category recorded the lowest yield of 12.60%. Yields then rise to 15.82% for ₹500–2,000 crore, 16.82% for ₹2,000–5,000 crore, and reach 19.49% for institutions above ₹5,000 crore. This variation may reflect differences in portfolio composition, pricing, product mix, and larger institutions’ ability to optimise portfolio deployment.