Ind-Ra expects MFIs to normalize in H2 FY26.

• India Ratings predicts MFIs’ return to normalcy by Q2 2026.

• The sector is ‘deteriorating’ due to recent government ordinances causing repayment anxieties.

• These ordinances aim to curb coercive practices of collection agents.

• Normalization to FY24 levels will be challenging due to rising operating expenses and rationalization of lending yields.

• Banks lending to MFIs are now factoring in non-MFI loans exposure.