CreditAccess Grameen: Navigating Growth and Stability in Q2 FY26

CreditAccess Grameen Limited, a prominent microfinance institution, has reported an improving performance trend for the second quarter and first half of FY26. Despite the seasonally weaker nature of Q2, the company demonstrated consistent business momentum and stabilizing asset quality, building on the strong trajectory established in Q1 FY26. The underlying strength of its customer-centric business model, coupled with supportive economic indicators like healthy monsoons and strong agricultural output, sets a positive outlook for robust on-ground demand and loan portfolio growth in H2 FY26.

For Q2 FY26, the company disbursed INR 5,322 crore, marking a significant 32.9% year-on-year increase. In H1 FY26, CreditAccess Grameen added approximately 4.4 lakh new borrowers, with 2.2 lakh joining in Q2 alone. Notably, 39% of these new borrowers in Q2 were new-to-credit, highlighting the company's strong customer acquisition capabilities. The portfolio share of unique borrowers has risen to 41% from 27% in August 2024. The company also expanded its last-mile reach by opening 150 branches in H1 FY26, including 96 in Q2 FY26, bringing the total branch count to 2,209.

Product Mix and Strategic Diversification

The company's Gross Loan Portfolio (GLP) product mix for Q2 FY26 reveals a diversified approach. Individual Group Loans (IGL) constitute the largest share at 85% (INR 22,079 crore), followed by Retail Finance at 11% (INR 2,869 crore). Other products like Home Improvement (3%, INR 716 crore), Family Welfare (1%, INR 238 crore), and Emergency (0%, INR 2 crore) make up the remainder. The Retail Finance portfolio's share increased from 6.8% in Q1 FY26 to 11.1% in Q2 FY26, partly due to a temporary decline in the GL book from accelerated write-offs and a calibrated strategy of disciplined underwriting. The company aims to expand individual business loans through GL branches more effectively, leveraging higher regulatory limits for non-MFI asset classes. Loan renewals for high-vintage group customers with better incomes, through individual business loans, are also supporting stronger borrower retention.

Asset Quality and Risk Management

CreditAccess Grameen's asset quality is showing signs of stabilization. The PAR 15+ accretion rate remained range-bound, with a temporary impact from heavy rains and floods across operating geographies. The company has demonstrated consistent deleveraging, with the GLP percentage of borrowers with more than three lenders decreasing to 6.9% in September 2025 from 25.3% in August 2024. Similarly, GLP percentage of borrowers with over INR 2 Lakh unsecured indebtedness stood at 7.2% in September 2025, down from 19.1% in August 2024. This indicates that delinquencies have largely crystallized among borrowers with more than three lenders, with approximately 80% of these customers continuing to make regular payments.

The company's accelerated write-off strategy has helped clean the legacy stress book, strengthening the foundation for sustainable growth. In Q2 FY26, write-offs totaled INR 683 crore, including INR 554.7 crore related to 180+ dpd non-paying accounts. The share of credit cost due to new PAR accretion has been consistently declining since Q3 FY25. CreditAccess Grameen continues to maintain higher provisions, holding approximately 156 bps (INR 383 crore) over PAR 90+, 268 bps (INR 681 crore) over IRAC prudential norms, and INR 89 crore over NBFC provisioning norms. The collection efficiency (excluding arrears) stood at 94.5% for Q2 FY26, with PAR 90+ at 2.50%, GNPA at 3.65%, and NNPA at 1.26% (predominantly measured at 60+ DPD).

Financial Performance and Outlook

Net interest income grew 4.2% quarter-on-quarter to INR 976 crore in Q2 FY26, with a portfolio yield of 20.7% and an interest spread of 11.1%. The average cost of borrowings continued its downward trajectory, declining by 11 bps to 9.6% by the end of Q2 FY26. The marginal cost of borrowing stood at 8.9% in Q2 FY26. Foreign borrowings remained healthy at 23.7%, progressing towards a medium-term target of 25-30% by FY28. The Net Interest Margin (NIM) remained steady at 13.3% for Q2 FY26, and the cost-to-income ratio stood at 32.5%. Pre-Provision Operating Profit (PPOP) was INR 695 crore in Q2 FY26. The company reported a Profit After Tax (PAT) of INR 126 crore in Q2 FY26, leading to an ROA of 1.8% and ROE of 7.1%.

Management anticipates a credit cost deviation of 70-100 bps for FY26 against initial guidance, with an overall credit cost ranging from 4% to 4.5% in FY27 due to increased ECL provisioning rates. However, the company aims to protect its ROA within the 4-4.5% range by leveraging its risk-based pricing, low cost of borrowings, and efficient operating structure. The company is confident in meeting its FY26 portfolio growth guidance of 12-14% and expects over 20% growth in FY27, driven by both retail finance and microfinance segments. The company's liquidity levels, including cash and cash equivalents, were adequate at INR 2,176 crore (7.9% of total assets), with sanctions in hand of INR 3,455 crore and an additional INR 6,260 crore in the pipeline. Capital adequacy remained comfortable at 26.1%.

CreditAccess Grameen's Q2 FY26 performance underscores its strategic clarity and disciplined execution. The company is focused on balancing growth with asset quality, leveraging its robust operational framework and diversified product offerings to deliver sustainable value to its stakeholders.