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Microfinance — making tiny loans to poor people or groups of poor people — has soared in India in the past few years. Before long, it could reach more people in India than the regular banking system.

That prediction came from Robert Annibale, global director of Citi Microfinance & Community Development at Citigroup Inc.

Bloomberg News A Hindusthan Microfinance Pvt. Ltd. employee checks loan application forms at the company’s office in Mumbai, India.Microfinance, whether from non-profits or for-profit financial companies reaches an estimated 70 million to 80 million people in India today compared with around 200 million for the regular branch-banking system.

But microfinance is growing faster than banking and, if the experience in other developing countries is mirrored here, microfinance “will reach more individuals than the banking sector,” Mr. Annibale told India Real Time.

“Over time, in terms of whole segments of the population, it can be a touchpoint for more people than commercial banks can be,” he said, because microloan networks are much easier and cheaper to establish than banks with branches or ATMs, guards and restricted office hours.

Mr. Annibale, speaking in New Delhi, likened the expansion of microcredit to the expansion of cellphones, which have become a product available to virtually everyone. It doesn’t matter whether they have the telephonic equivalent of a bank branch: a fixed-line phone.

To realize its potential in India, the microfinance industry needs to take a few steps. One is for the Reserve Bank of India to figure out exactly how these institutions should be regulated.

The industry, Mr. Annibale said, also needs credit-rating capacity and capital, which many lenders are now seeking.

Microlenders so far also have offered a rather plain-vanilla set of products. Or rather, product: a 12-month small loan to a group, usually of women, that meets and repays once a week. One thing that could give the industry impetus would be for lenders to offer varying types of product, for instance, to adjust repayments to the cycle of the seasons, or to allow meetings of borrowers only once a month.

“It goes back to the client and the needs of the client,” Mr. Annibale said. “That is what will make the sector really come into its own.”