N※N

India's MSME Credit Soars 16% YoY to INR46 Lakh Crore

  //business-finance.news-articles.net/content/202 .. sme-credit-soars-16-yoy-to-inr46-lakh-crore.html
  Published in Business and Finance on Friday, December 26th 2025 at 12:33 GMT by The Hans India

• 🞛 This publication is a summary or evaluation of another publication
• 🞛 This publication contains editorial commentary or bias from the source

2025-12-26 224 x 224 / 11465 Bytes

2025-12-26 179 x 224 / 13694 Bytes

2025-12-26 179 x 224 / 10611 Bytes

2025-12-26 224 x 224 / 12341 Bytes

Small‑Business Credit in India Climbs 16 % YoY to ₹46 Lakh Crore – A Deep Dive into the Numbers, Drivers and Policy Pulse

The small‑business sector has long been the engine of India’s growth narrative, generating employment for a vast swath of the country’s workforce and driving inclusive development. A recent report by the Reserve Bank of India (RBI) and highlighted in The Hans India brings a welcome uptick to the sector’s fortunes. Credit supplied to micro‑, small‑ and medium‑enterprises (MSMEs) rose by 16 % year‑on‑year to a staggering ₹46 lakh crore, according to the data released by the RBI in its quarterly bulletin. The surge, the article explains, is largely a product of policy‑driven interventions – from expanded credit guarantee schemes to new lending frameworks that lower entry barriers for entrepreneurs.

1. The Numbers: A Quick Recap

The growth is not confined to a single segment; small‑enterprise banks, commercial banks, and non‑bank financial institutions (NBFIs) all reported a measurable uptick in lending. The RBI’s bulletin notes that the credit‑to‑MSME ratio rose from 8.3 % to 8.9 % of total bank credit, underscoring the sector’s increasing share in the overall financial landscape.

For those who want to dig into the raw data, the RBI’s [ MSME Credit Data Portal ] offers a downloadable PDF and a detailed breakdown of disbursements by bank type and industry category.

2. Policy Measures That Made the Difference

The Hans India underscores three primary policy levers that pushed the credit growth:

a) Pradhan Mantri Mudra Yojana (PMMY) Expansion

PMMY, introduced in 2015 to provide up to ₹10 lakhs to start‑ups and small firms, was broadened in 2023 to include a wider borrower pool – especially women entrepreneurs and artisans. RBI’s credit guidelines now allow banks to classify a broader spectrum of assets under the “small‑enterprise” umbrella, thereby easing the risk assessment process.

b) Credit Guarantee Fund Trust for Micro‑ and Small‑Enterprises (CGTMSE)

The CGTMSE scheme has been the most potent risk‑mitigation tool. In 2023, the government increased the guarantee coverage from 85 % to 90 % for credit lines up to ₹10 lakhs, reducing the effective risk premium for banks. The RBI’s bulletin notes that 35 % of the total credit disbursed in the quarter was backed by CGTMSE, a sharp rise from 27 % in the previous year.

c) NABARD’s “Aadhaar‑Based” Credit Facilitation

The National Bank for Agriculture and Rural Development (NABARD) rolled out a new digital credit platform in 2023 that links loan disbursement directly to the borrower’s Aadhaar data, reducing documentation time and improving default monitoring. According to the RBI, NABARD’s MSME loan portfolio grew by 22 % in the same period.

3. Impact Beyond the Balance Sheet

Credit growth is a vital indicator, but the Hans India article stresses that the real test lies in downstream outcomes.

a) Employment Creation

The MSME sector employed 94 million people in 2022, according to the Ministry of Micro, Small & Medium Enterprises (MSME). A 16 % credit jump is expected to translate into an additional 500,000 jobs over the next two years, primarily in manufacturing, textiles, and agri‑processing.

b) Financial Inclusion

A significant portion of the new credit came from small‑enterprise banks and NBFIs, both of which have a higher footprint in Tier‑2 and Tier‑3 cities. The RBI’s inclusion index saw a 1.2 % rise in the same quarter, signalling a broader reach.

c) Innovation and Digitalisation

Many MSMEs are adopting digital platforms for inventory management, customer engagement, and supply‑chain financing. The increase in credit is expected to fuel the adoption of fintech solutions, which could further improve operational efficiency.

4. Challenges That Still Persist

Despite the optimistic headline, the Hans India piece acknowledges several lingering hurdles:

• Interest Rate Environment: Rising global rates have pushed domestic rates higher, making it more expensive for MSMEs to refinance their debt.
• Collateral Gap: Even with CGTMSE, many MSMEs lack formal collateral, limiting the depth of credit they can access.
• Risk Appetite: Banks are increasingly cautious about “non‑performing assets” (NPAs) in the wake of the COVID‑19 wave, which may curb future lending even amid policy incentives.

5. What the Future Looks Like

The RBI’s forthcoming policy brief, slated for release in Q4 2023, is expected to further tweak the CGTMSE coverage and introduce a “Digital MSME Credit Score” that aggregates alternate data sources. The Hans India article speculates that if the momentum continues, the sector could reach ₹70 lakh crore by 2025, a 50 % YoY growth from 2023 levels.

In addition, the Ministry of MSME is planning a new “Micro‑Enterprise Digital Hub” that will provide training, market linkages, and legal support to small businesses, ensuring that the credit doesn’t just circulate but also translates into sustainable value creation.

6. Quick Takeaways for Stakeholders

Bottom Line

The 16 % rise in small‑business credit is more than a statistical win—it signals a broader shift toward a more inclusive, risk‑managed, and digitally‑enabled credit ecosystem. By aligning policy measures with real‑world business needs, India is setting the stage for sustained employment creation, higher GDP contributions from the MSME sector, and a resilient financial system that can weather both domestic and global shocks.

For a deeper dive, the original article on The Hans India and the RBI’s quarterly MSME credit bulletin are excellent starting points. The synergy between policy incentives and market execution promises a promising trajectory for India’s small‑business community.