Banks have shown preference for lending to microfinance institutions over individual borrowers during the April-June quarter, indicating a strategic shift to keep off those seeking loan at the bottom of the economic pyramid, a report said on Tuesday. The microfinance portfolio outstanding of banks, where they lend directly to borrowers, declined 28.5 per cent year-on-year to Rs 83,080 crore as of June 30, 2026, from Rs 1.16 lakh crore a year earlier, according to the latest MFIN Micrometer report. The decline was largely due to banks shifting microfinance loans to retail portfolios through reclassification, the report said.