The Andhra Crisis of 2010 is well known as a critical juncture for microfinance as borrowers were coerced and reportedly committed suicide due to repayment pressures. This presented a regulatory challenge to the Indian state: was microfinance ‘moneylending’ or ‘financial services’ and how was it to be regulated? Scholarship on state capitalism highlights new responsibilities taken on by states by participating in financial markets. In contrast, postcolonial studies show how the neoliberal postcolonial state actively hands over key responsibilities to private actors. By bringing in the concept (and practices) of the developmental state, I show how multiple levels of state authority present both neoliberal and developmental approaches to state-finance relations. Drawing on multi-scalar fieldwork with central and state institutions in India, this paper highlights central institutions’ neoliberal logics for classifying microfinance as a ‘financial service’ contra state-level institutions’ developmental prescription to classify it as ‘moneylending’. Ultimately, the regulatory challenge is resolved by instating self-regulation for the sector. This shows how despite contestations, financial services that target low-income groups can reshape state authority, regulation and accountability and align these with market logics.