Detailed Rationale

Crisil Ratings has reaffirmed its rating on the long-term bank facilities of CreditAccess Grameen Limited (CAGL) to ‘Crisil AA-/Stable’.

 

The rating continues to factor in strong market position and long track record of CAGL in the microfinance sector. The rating also takes into consideration company’s adequate capital position, adequate earnings profile and moderate asset quality. These strengths are partially offset by high, though improved substantially, geographical concentration in portfolio, inherently modest credit risk profile of the borrowers and, high susceptibility of asset quality to local socio-political issues.
 

CAGL continues to maintain its market position with largest microfinance within the sector with a track record of over 2.5 decades. Nevertheless, the company has also been navigating through the various challenges faced by the sector over last 4-6 quarters, which has affected its performance on sequential basis.
 

Company’s portfolio quality got affected on account of various challenges such as increase in indebtedness levels across customers, along with external challenges like heat waves, elections and ground level attrition. Apart from these challenges, the sector also saw major events in the form of law getting applied in state of Karnataka (The Karnataka Micro Loan & Small Loan (Prevention of Coercive Actions) Act, 2025) during Q4 fiscal 2025. Since CAGL had around 30% of its portfolio within Karnataka state, this led to impact on company’s portfolio quality during that quarter. The company, however, took several proactive steps by increasing field level efforts towards collections and reducing incremental exposure within the state. The result of the same was visible towards second half of Q1 and Q2 of fiscal 2026. The flow rates on monthly basis (15+ accretion to AUM) reached a peak level of 1.9% in March 2025, steadily reduced to 0.5% towards of end of Q2 fiscal 2026. As far as delinquencies are concerned (portfolio at risk (PAR) at 90+ dpd), for state of Karnataka, it reduced to 3.9% in Q2 fiscal 2026 from 5.1% in Q1 of same fiscal. However, it still remained high in comparison to 2.4% in Q4 fiscal 2025. On an overall basis, the company’s PAR at 60+ dpd reduced to 3.1% in Q2 fiscal 2026 from 4.3% in Q4 fiscal 2025. Similar trend was observed in PAR 90+ dpd; it reduced to 2.5% in Q2 fiscal 2026 from 3.3% in Q4 fiscal 2025. As far as collection efficiency is concerned, the average monthly collection efficiency stood at ~94% during H1 of fiscal 2026. While the company’s asset quality performance has been resilient during challenging times, its ability to sustain the current level of asset quality position remains monitorable. Hence, the ability of the company to maintain this trajectory will be key rating sensitivity factor.
 

Owing to portfolio quality issues and cautious stance adopted by the management towards fresh disbursements, the company’s assets under management (AUM) remained almost flat at Rs 25,904 crore as on September 30, 2025, as compared to Rs 25,948 crore as on March 31, 2025. The consequent impact of lack of growth and higher provisioning needs (due to portfolio quality issues) was visible on company’s earnings profile. The return on managed assets (ROMA) of the company stood at 1.3% (annualised) during the first half of fiscal 2026, reducing from 1.8% during fiscal 2025 and 5.4% during fiscal 2024. Nevertheless, CAGL’s RoMA still remained much better than industry average since many MFIs reported lower accretions or losses during current fiscal on account of portfolio quality issues. Credit costs inched up during the same period to 7.8% (annualised), on account of conservative provisioning policy and accelerated write offs, with the company holding Rs 383 crore (1.56%) higher provisioning over PAR 90+, Rs 681 crore (2.68%) higher compared to IRAC prudential norms, and Rs 89 crore higher provisions compared to the NBFC industry. As far as operational costs are concerned, CAGL has sustained its operating expenses across business cycles, remaining in the range of 3.9% - 4.7% during the past 3-4 fiscals. NIMs stood at ~13% (annualised) during H1 of fiscal 2026. While company’s profitability is expected to be less during the current fiscal in comparison to its historical average, it will continue to be better than its peers.
 

Company’s capital position continues to remain adequate supported by its internal accruals and parentage of CAI which has demonstrated track record of extending equity support to the company. As of September 30, 2025, networth stood at Rs 7,164 crore as compared to Rs 6,956 crore in March 2025 (Rs 6,570 crore in March 2024). Gearing has also remained comfortable at 2.8 times as of September 30, 2025 (2.9 times as of March 2025). Over a decade of association with CAI as its majority stakeholder (which holds 66.54% stake in CAGL), the latter has received need-based capital from it which has allowed the company to maintain growth momentum while maintaining adequate cushion to absorb risks alongside.

Analytical Approach

For arriving at the ratings, Crisil Ratings has considered the standalone business and financial risk profiles of CAGL.

Key Rating Drivers - Strengths 

Strong market position in microfinance sector with long track record

CAGL remains the largest standalone microfinance institution in the country with an established track record of over 2.5 decades. As on September 30, 2025, the company had an AUM of Rs 25,904 crore of which ~3.0% was off book.  The company has been able to scale the business at a robust rate in terms of size as well as operational presence, and all this while maintaining the operational parameters and infrastructure at comfortable levels. The company’s portfolio currently focuses on the microfinance business which is its core competence. However, as customers with long credit history and association with CAGL have matured across loan cycles, the company is building its retail finance portfolio. As on September 30, 2025, the company had a network of 2209 branches across 16 states and 1 union territory and, a major footprint in the west and south.
 

Adequate capitalization

In relation to its scale and nature of operations, CAGL’s capitalisation is adequate, supported by its internal accruals and parentage of CAI which has demonstrated track record of extending equity support to the company. On September 30, 2025 - CAGL had a reported networth of Rs 7,164 crore and an overall capital adequacy ratio of 26%. Gearing on the same date stood at 2.8 times and has remained comfortable in the past as well. Over a decade of association with CAI as its majority stakeholder (which holds about 66% stake in CAGL), the latter has received need-based capital from it which has allowed the company to maintain growth momentum while maintaining adequate cushion to absorb risks alongside. In the near to medium term, CAGL’s capital position is expected to remain adequate with a steady state gearing philosophy of 4 times and a CAR of above 20%.
 

Adequate earnings profile despite inch up in credit costs

CAGL’s profitability while has remained adequate, the consequent impact of lack of growth and higher provisioning needs (due to portfolio quality issues) was visible on the same. The return on managed assets (ROMA) of the company stood at 1.3% (annualised) during the first half of fiscal 2026, reducing from 1.8% during fiscal 2025 and 5.4% during fiscal 2024. Nevertheless, CAGL’s RoMA still remained much better than industry average since many MFIs reported lower accretions or losses during current fiscal on account of portfolio quality issues. Credit costs inched up during the same period to 7.8% (annualised), on account of conservative provisioning policy and accelerated write offs, with the company holding Rs 383 crore (1.56%) higher provisioning over PAR 90+, Rs 681 crore (2.68%) higher compared to IRAC prudential norms, and Rs 89 crore higher provisions compared to the NBFC industry. As far as operational costs are concerned, CAGL has sustained its operating expenses across business cycles, remaining in the range of 3.9% - 4.7% during the past 3-4 fiscals. NIMs stood at ~13% (annualised) during H1 of fiscal 2026. While company’s profitability is expected to be less during the current fiscal in comparison to its historical average, it will continue to be better than its peers.

 

Moderate asset quality

After having operated at low delinquency levels over many years, CAGL’s asset quality moderated during recent sectoral challenges. Company’s portfolio quality got affected on account of various challenges such as increase in indebtedness levels across customers, along with external challenges like heat waves, elections and ground level attrition. Apart from these challenges, the sector also saw major event in the form of ordinance/act getting applied in state of Karnataka (The Karnataka Micro Loan & Small Loan (Prevention of Coercive Actions) Act, 2025) during Q4 fiscal 2025. Since CAGL had around 30% of its portfolio within Karnataka state, this led to impact on company’s portfolio quality during that quarter.
 

The company, however, took several proactive steps by increasing field level efforts towards collections and reducing incremental exposure within the state. The result of the same was visible towards second half of Q1 and Q2 of fiscal 2026. The flow rates on monthly basis (15+ accretion to AUM) which got at peak level of 1.9% in March 2025, steadily reduced to 0.5-0.6% towards of end of Q2 fiscal 2026. As far as reported metrics are concerned, CAGL's GNPA and NNPA improved to 3.65% and 1.26% (as per Ind-AS) as on September 30, 2025, respectively as against 4.76% and 1.73%, respectively in March 2025. Even as per IRAC norms, the NPA position improved to 3.1% (GNPA) and 1.09% (NNPA) as on September 30, 2025, from level of 3.85% (GNPA) and 1.39% (NNPA) as on March 31, 2025. Crisil Ratings notes that the company didn’t sell any portfolio to ARCs and wrote off Rs 2270 crore (8.8% of the portfolio as of September 2025) in the last 12 months. The 90+ adjusted (including last 12 months’ write-offs) stood at 11.3% as on September 30, 2025. While the company’s asset quality performance has been resilient during challenging times, its ability to sustain the current level of asset quality position remains monitorable. Hence, the ability of the company to maintain this trajectory will be key rating sensitivity factor.

Key Rating Drivers - Weaknesses 

High regional concentration in operations

Despite gradual diversification across states over the last few years, the regional concentration in CAGL’s loan portfolio remains high – with top 3 states accounting for over 71% of the AUM as on September 30, 2025. From 70% in March 2015, the share of Karnataka, which is the largest state in terms of concentration – reduced to 51.5% of the loan book - by the end of March 2019. This was followed by Maharashtra accounting for 26.1% of the AUM and another 10.7% being housed in Tamil Nadu. With MMFL’s on-boarding in fiscal 2020, there has been further improvement on this front. On September 30, 2025 – exposure to Karnataka and Maharashtra reduced to 30.5% and 21.9% respectively, and in Tamil Nadu– exposure stood at 18.5%. Even at a district level – concentration has remained on a higher side with top 10 districts accounting for 18% of the AUM as of September 30, 2025, while it has reduced from 32% level as of March 2019.

 

Risks arising from exposure to borrowers with inherently weak credit risk profiles and socio-political issues in the sector

A significant portion of the company’s portfolio comprises loans given to individuals under the joint-liability group (JLG) mechanism. Its customers generally have below-average credit risk profiles with lack of access to formal credit. Such borrowers are typically farmers, tailors, cattle owners/traders, small vegetable vendors, teashop owners and dairy farmers etc. The incomes of these households could be volatile and dependent on the performance of the local economy.
 

The microfinance sector has witnessed various events over the years, including regulatory and legislative challenges that have disrupted operations. Some of these events include the Andhra crisis, demonetisation in 2016, Covid-19 pandemic and sociopolitical issues in certain states. These events have adversely affected the sector, elevating delinquencies and hurting the profitability and capitalisation metrics of non-banking financial company microfinance institutions (NBFC-MFIs). These challenges underscore the vulnerability of the microfinance business model to external risks. Covid-19, in particular, introduced new challenges, aggravating existing vulnerabilities in the microfinance sector by heightening credit risks and the likelihood of loan default by borrowers. While the sector has navigated these events, it remains susceptible to issues, including local elections, natural calamities, and borrower protests, which may increase delinquencies for a while.  Further, the sector is regulated by multiple bodies (including self-regulatory bodies) which, from time-to-time, have been providing several directives to maintain credit discipline and avoid over indebtedness for borrowers.

Liquidity Strong

As on October 31, 2025, cash and cash equivalents stood at Rs 1,644 crore. The liquidity cover for debt obligations arising over the following 2 months, without factoring in any roll-over or any incremental collections or unutilized bank lines and assuming 50% collection efficiency, was around 1.4 times. Based on ALM statement dated September 30, 2025 – there were no negative cumulative mismatches in any time in short term and long-term buckets.

 

Key ESG highlights of the CAGL

• CAGL aims to become an industry leader in an inclusive and sustainable workplace by maintaining and continuing to lead the industry as a great place to work by integrating global gender-inclusive best practices.
• CAGL through its lending practices has been enabling financing to new to credit customers, rural areas, for women empowerment and strives to provide sustainable livelihood related financing products for its customers.
• The company is doing CSR activities on a continuous basis through social arm, CA India Foundation focusing on areas of Education, Livelihood, Health, and Rural Public Institution Development spanning the value chain.
• Of the board members, 3 out of 8 are independent directors with chairman also being one of the independent directors. The company has extensive investor grievance redressal disclosures and mechanism in place.

 

There is growing importance of ESG among investors and lenders. The company’s commitment to ESG will play a key role in enhancing stakeholder confidence given the substantial share of foreign investors as well as access to domestic capital markets.

Outlook Stable

Crisil Ratings believes CAGL will sustain its market position in the microfinance sector and maintain healthy capitalization metrics. The business risk profile will benefit from the expanding scale of operations and improving asset quality.

Rating sensitivity factors

Upward factors

• Overall profitability (RoMA) remains above 4% while maintaining adjusted gearing at 3-3.5 times.
• Substantial improvement in asset quality metrics resulting in lower credit costs
• Geographical diversification in operations alongside scale with reduction in state-level concentration

 

Downward factors

• Deterioration in asset quality, leading to weakness in overall profitability reflected in RoMA remaining below 3% on sustained basis. 
• Moderation in capitalization – evidenced by gearing increasing to and remaining above 5 times commensurate to a decline in tier I CAR to below 18% on sustained basis

About the Company

Established in 1991 as Sanni Collection Private Limited in West Bengal, CAGL commenced its microfinance operations in 1998 as a division under T. Muniswamappa Trust (TMT), a registered public charitable trust/NGO. In 2007, it transformed into a microfinance institution under the brand name Grameen Koota and subsequently in the year 2016, the company started its retail finance portfolio. In 2018, its name was changed to CreditAccess Grameen Ltd and the company got listed in the same year. Subsequently in 2020, it acquired 76% stake in a Tamil Nadu based MFI – MMFL which it eventually increased to 100% by March, 2023. The company’s operations are spread across 17 states (including 1 Union Territory) with a borrower base of 4.4 million

Key Financial Indicators

Particulars	Unit	Sep-25/ H1 2026	Mar-25	Mar-24	Mar-23
Assets under management	Rs crore	25,904	25,948	26,714	21,031
Total income	Rs crore	2,973	5,756	5173	3551
Profit after tax (PAT)	Rs crore	186	531	1446	826
Return on managed assets#	%	1.3	1.8	5.4	3.9
GNPA (reported as per Ind-AS)	%	3.65	4.76	1.2	1.2
GNPA (reported as per IRAC)	%	3.10	3.85	0.95	1.2
Gearing	Times	2.8	2.9	3.3	3.2

#Annualised 

Any other information: Not applicable