Startup Deep Dive : Annapurna Finance — how a bank rejection and a profit crash hit in the same year

In June 2025 the Reserve Bank of India turned down Annapurna Finance’s application to become a full-scale universal bank, filed two and a half years earlier. Nine months before that rejection, the Bhubaneswar-based lender’s loan book had touched ₹11,034 crore (~$1.15 billion at $1 ≈ ₹96.0, 18 September 2026, Trading Economics) as of 31 March 2025, one of the largest microfinance books in the country, as per CARE Ratings and ICRA.

The contradiction is that scale and stress arrived together. In the same year its loan book peaked, Annapurna’s profit after tax fell from ₹232 crore in FY24 to ₹69 crore in FY25, as per ICRA’s rating rationale, a fall the company attributes to an industry-wide bout of borrower overleveraging. This is the story of a lender built by a rural-development NGO in Odisha, one that grew into a top-ten NBFC-MFI, took on marquee global impact investors, and then hit a wall in the same year Indian microfinance as a whole hit one.

Quick facts

What they do

Annapurna Finance is a non-banking finance company registered with the Reserve Bank of India as an NBFC-MFI, meaning most of its book is microcredit extended to women through joint-liability groups for income-generating activities such as small trade, agriculture and animal husbandry. Around this core it has layered individual loans for micro, small and medium enterprises, home-improvement and affordable-housing loans, rooftop solar financing, and consumer-durable loans, as per the company’s own product disclosures and rating agency notes. As of 31 March 2025 it served more than 29.3 lakh (2.93 million) borrowers through 1,636 branches across 439 districts in 21 states, as per ICRA and CARE Ratings, making it one of India’s ten largest NBFC-MFIs by loan book.

The origin

Annapurna’s roots are not in finance at all. People’s Forum, an Odisha-based development NGO working on women’s empowerment, education and livelihood security, began experimenting with door-to-door microcredit in 2005 under a programme it called Mission Annapurna, aimed at the interior, unserved pockets of the state where formal banking barely reached. The founding insight was simple and unglamorous: rural women running small trades and farms needed small, frequent, dependable credit more than they needed charity, and an NGO’s grant cycle could not deliver that reliably. In 2007, People’s Forum separated the lending activity from its welfare work, and in 2009 that separated activity was incorporated as Annapurna Microfinance Pvt Ltd (AMPL), with Gobinda Chandra Pattanaik, People’s Forum’s member secretary and long-time development-sector hand, as its founder. The company formalised its status by registering with the RBI as an NBFC-MFI in 2013, a step that let it borrow from banks on commercial terms rather than lean on grants and donor capital, as per the company’s own account of its history.

The struggle years

The clearest documented setback is the COVID-19 shock of 2020. When the nationwide lockdown hit and the RBI’s loan moratorium ran from March to August 2020, Indian microfinance collection efficiency collapsed to a low of 3% in April 2020 before crawling back, according to industry data cited by CGAP-linked research. Annapurna’s own borrowers were split on whether the relief even helped: in a contemporaneous survey reported by NextBillion, only 69% of surveyed Annapurna borrowers said the moratorium had benefited them, evidence that even a national payment holiday could not fully cushion a client base of small, cash-dependent rural borrowers. The company’s response was to keep raising external capital through the disruption rather than retrench, closing a $35 million round with Encourage Capital, Accion and Oikocredit in December 2021 even as the sector was still recovering.

The second, more recent setback is the FY2025 asset-quality shock. Gross non-performing assets rose from 2.87% as of 31 March 2024 to 2.97% by 30 September 2024 and to 4.0% by 31 December 2024, as per CARE Ratings, as an industry-wide wave of borrower overleveraging, employee attrition and, in some states, political disruption hit microfinance lenders broadly, not Annapurna alone. Profit after tax fell from ₹232 crore in FY24 to ₹69 crore in FY25, and annualised return on managed assets fell from 2.0% to 0.6% over the same period, as per ICRA’s rating rationale. The company leaned on a Credit Guarantee Fund for Micro Units (CGFMU) cover across a large share of its microfinance book to blunt the credit-cost hit, per ICRA, but the earnings damage still showed up in the FY25 numbers.

The turning point

The single clearest hinge in Annapurna’s story is the Reserve Bank of India’s rejection of its universal bank licence application. Annapurna applied for the licence in January 2023, at a moment when its loan book was compounding at a five-year CAGR of roughly 28% (through FY2024, per ICRA) and its scale, geographic spread and impact-investor backing made a full-fledged bank look like a plausible next step for a company that had grown out of an NGO’s door-to-door lending programme. On 6 June 2025 the RBI rejected the application, saying Annapurna was “not suitable” for an in-principle approval under its extant guidelines, as reported by Business Standard and BW Businessworld. The rejection landed in the same window as the FY25 earnings collapse described above: a company that had spent more than two years positioning itself to become a regulated deposit-taking bank instead had to absorb a 70% fall in profit and a doubling-plus of its gross NPA ratio, and go back to being, indefinitely, an NBFC-MFI raising debt from banks and development-finance institutions rather than deposits from the public.

The money behind it

Annapurna has been financed less by venture capital than by a syndicate of development-finance institutions and impact investors, consistent with its NGO origins. According to CB Insights data, the company has raised a cumulative $466.5 million across 21 disclosed rounds of equity, debt and structured facilities. The named backers and what each round did:

• Nuveen Global Impact Fund: $30 million in March 2021, one of the largest single equity infusions into an Indian MFI at the time, per Business Standard.
• DEG (Deutsche Investitions- und Entwicklungsgesellschaft): $20 million in November 2021, widening the German development-finance institution’s exposure to Indian microfinance, per Business Standard.
• Encourage Capital, Accion and existing investor Oikocredit: $35 million in December 2021, earmarked partly for green microfinance and digitalisation, per Accion’s own announcement and MicroCapital.
• Proparco (the French development-finance institution): $15 million in June 2022, per YourStory.
• Piramal Alternatives: ₹600 crore in May 2024, split as ₹300 crore for a secondary purchase of a 9.85% stake and ₹300 crore into optionally convertible debentures, giving Annapurna Tier-II-eligible capital as well as a shareholder exit route, per Business Standard and YourStory.

Together with earlier backers including the Asian Development Bank and Oman India Joint Investment Fund, this syndicate turned Annapurna from an NGO offshoot into a company that, per ICRA, held ₹11,034 crore in assets under management as of 31 March 2025. Annapurna has not disclosed a headline valuation figure alongside any of these rounds; the Piramal transaction’s stake percentage and rupee amount are confirmed, but the implied company valuation was not stated by either party in the reporting reviewed, so it is left out here rather than backed into.

How it makes money

Annapurna earns interest income on loans funded mostly by bank borrowings, non-convertible debentures and external commercial borrowings, then keeps the spread between what it pays lenders and what it charges borrowers, minus credit costs and operating expenses. Its own interest-rate disclosure sets the general microfinance lending rate at 22% on a reducing-balance basis, with select agricultural products such as paddy and vegetable-cultivation loans priced at 24% and a concessional 18% rate for borrowers with disabilities; it also charges a processing fee of 1% of the loan amount plus taxes, per the company’s published interest-rate disclosure.

• Money in: interest and fee income on microfinance, MSME, housing, solar and consumer-durable loans, priced between 18% and 24% depending on product, per the company’s rate disclosure.
• Money out: interest paid to banks, NBFCs and development-finance institutions that fund the book; the company’s gearing (managed) stood at 5.4 times as of December 2024, per CARE Ratings, meaning borrowed money funds the large majority of the loan book.
• Where the margin sits: in the gap between the roughly 22% weighted lending rate and its cost of borrowed funds, after absorbing credit costs, which is exactly the line item that widened in FY2025 as gross NPAs rose.
• What people get wrong: microfinance is often assumed to be a volume-and-scale business where growth alone drives profit. Annapurna’s FY2025 shows the opposite is equally true, its loan book grew even as profit fell by 70%, because credit costs and provisioning, not top-line growth, decide the bottom line in a bad underwriting year.

The numbers

Annapurna’s income and profit trajectory, drawn from ICRA’s published rating rationales, shows steady top-line growth through FY2024 followed by a sharp profit contraction in FY2025 even as the book kept expanding:

• Assets under management: ₹10,336 crore as of 31 March 2024, rising to ₹11,034 crore as of 31 March 2025, then easing to ₹10,839 crore as of 30 September 2025, as per CARE Ratings and ICRA, a five-year CAGR of about 22% through FY2025.
• Return ratios: annualised return on managed assets fell from 2.0% in FY24 to 0.6% in FY25; return on net worth fell from 13.8% to 3.9% over the same period, per ICRA.
• Asset quality: gross NPA moved from 2.87% (31 March 2024) to 2.97% (30 September 2024) to 4.0% (31 December 2024), per CARE Ratings.
• Capitalisation: capital adequacy ratio of 31.5% as of December 2024, comfortably above the regulatory minimum, per CARE Ratings.
• Leverage: gearing (managed) of 5.4 times as of December 2024, per CARE Ratings.
• Liquidity: free cash, bank balances and liquid investments of ₹882 crore as of 31 December 2024, against scheduled debt repayments of ₹3,367 crore for the following twelve months, which ICRA assessed as adequately covered given expected inflows from advances of ₹4,357 crore over the same period.

Where the money comes from

Annapurna was built as a single-state lender and still carries that legacy in its portfolio mix, even as its footprint has widened considerably.

• Geographic concentration has fallen over time: Odisha’s share of the portfolio was about 60.1% as of March 2016 and had eased to roughly 50.7% by September 2017, with Madhya Pradesh (about 14.8%) and Maharashtra (about 10.2%) the next-largest states at that time, per a CRISIL MFI grading report hosted by the company. Annapurna has not published a more recent state-wise breakup in the filings reviewed for this piece, so a current percentage figure is deliberately left out rather than assumed unchanged.
• Product mix: group microfinance loans to women remain the core book, layered with individual MSME loans, home-improvement and affordable-housing loans, rooftop solar financing and consumer-durable loans, per the company’s own product pages and rating-agency notes; the company has not disclosed the exact rupee split across these newer lines in the sources reviewed.
• Network: the surprise is less about geography than reach, from an NGO’s door-to-door programme in one state, Annapurna now runs 1,636 branches across 439 districts in 21 states, serving 29.3 lakh borrowers, as of 31 March 2025 per ICRA and CARE Ratings, but its lending rate card still looks almost exactly like a classic group-microfinance MFI’s: 18-24% on a reducing balance, with a 1% processing fee.

The risks

• Borrower overleveraging and unsecured lending: nearly all of Annapurna’s microfinance loans are unsecured group loans to a marginal borrower base that is susceptible to income shocks, a risk ICRA and CARE both flag explicitly, and one that materialised directly in the gross NPA rise from 2.87% to 4.0% between March and December 2024.
• Political and operational disruption: rating agencies cite socio-political disruptions and high employee attrition in the microfinance industry, both of which raise collection costs and slow recovery in stressed pockets, per ICRA’s FY2025 commentary on the sector.
• Concentrated funding and high leverage: with gearing (managed) at 5.4 times as of December 2024, Annapurna depends on continued access to bank and development-finance-institution funding lines; any tightening in wholesale credit for NBFC-MFIs, of the kind the sector saw around FY2025’s stress, would raise its cost of funds directly, per CARE Ratings.

The takeaway

Annapurna’s arc suggests that scale in microfinance is not the same thing as safety. A company can grow its loan book to over ₹11,000 crore, win the backing of some of the most reputed development-finance institutions in the world, and still watch profit fall by 70% in a single year when the underlying borrower base comes under simultaneous stress. The lesson generalises past microfinance: any lending business built on small, hard-to-diversify exposures is only ever as strong as the credit cycle it happens to be growing through, and the moment to worry is not when growth slows, but when growth and stress show up in the same set of accounts.

Frequently asked questions

Is Annapurna Finance a bank

No. It is a non-banking finance company registered with the RBI as an NBFC-MFI. It applied for a universal bank licence in January 2023, and the RBI rejected that application on 6 June 2025, as per Business Standard.

Who founded Annapurna Finance

Gobinda Chandra Pattanaik, who also led the Odisha-based NGO People’s Forum, founded the entity that became Annapurna Finance; its microfinance activity traces back to People’s Forum’s Mission Annapurna programme, started in 2005.

How big is Annapurna Finance’s loan book

Its assets under management stood at ₹11,034 crore as of 31 March 2025 (about $1.15 billion at $1 ≈ ₹96.0, 18 September 2026), easing to ₹10,839 crore by 30 September 2025, as per CARE Ratings and ICRA.

Who are Annapurna Finance’s main investors

Its backers include Nuveen Global Impact Fund, DEG, Encourage Capital, Accion, Oikocredit, Proparco and, most recently, Piramal Alternatives, which paid ₹300 crore for a 9.85% stake in May 2024.

Why did Annapurna Finance’s profit fall in FY2025

Profit after tax fell from ₹232 crore in FY24 to ₹69 crore in FY25 as gross NPAs rose from 2.87% to 4.0% amid an industry-wide bout of borrower overleveraging, per ICRA’s rating rationale.

Sources

Figures are as of September 2026. Currency converted at $1 ≈ ₹96.0 as of 18 September 2026 (Trading Economics).

• Annapurna Finance, “Our Journey” (company history), annapurnafinance.in, accessed September 2026
• Annapurna Finance, Products and Services and Disclosure on Interest Rates, annapurnafinance.in, accessed September 2026
• CARE Ratings, Press Release on Annapurna Finance Private Limited, careratings.com, December 2024 and December 2025
• ICRA, Rating rationale on Annapurna Finance Private Limited, icra.in, 2024 and 2025
• Business Standard, “RBI rejects Annapurna Finance’s application to set up universal bank”, June 2025
• BW Businessworld, “RBI Rejects Annapurna Finance’s Bid For Universal Bank Licence”, June 2025
• Business Standard, “Odisha-based Annapurna Finance applies for universal bank license”, January 2023
• Accion, “Annapurna Finance raises USD 35 million from Accion, Encourage Capital, and Oikocredit”, December 2021
• MicroCapital, “Annapurna Raises $35m from Accion, Encourage Capital, Oikocredit”, December 2021
• Business Standard, “German financial institution invests $20 million in Annapurna Finance”, November 2021
• YourStory, “Microfinance lender Annapurna Finance raises $15M from Proparco”, June 2022
• Business Standard and YourStory, coverage of Piramal Alternatives’ ₹600 crore investment in Annapurna Finance, May 2024
• CB Insights, company financing summary for Annapurna Finance, accessed September 2026
• NextBillion, “The Impact of the COVID-19 Pandemic on Indian Microfinance”, 2020-2021 reporting period
• CRISIL, MFI Grading Report on Annapurna Microfinance Private Limited, December 2017

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