India’s MSME Commercial Credit Portfolio Grew 13% YoY

MUMBAI:
The commercial credit portfolio for India’s Micro, Small and Medium Enterprises (MSME) sector grew at 13% year-over-year (YoY) as the overall credit exposure increased to Rs 35.2 lakh crore as of March 31, 2025. This trend was largely driven by an increase in credit supply to existing borrowers, according to TransUnion CIBIL and SIDBI’s MSME Pulse Report for May 2025. The MSME sector includes borrowers with credit exposures up to Rs 50 crore.

Growth in the overall credit portfolio was accompanied by an improvement in balance-level serious delinquencies (measured as 90 to 720 days past due (DPD) and reported as ‘sub-standard’), which fell to 1.8%, a five-year low.

Credit Performance Remains Strong, With Reduction in Balance-level Delinquencies
Overall MSME balance-level delinquencies improved to 1.8%, a 35 basis points drop from 2.1% in March 2024. This improvement was primarily driven by the borrower segment with exposure of Rs 50 lakh to Rs 50 crore. The borrower segment with exposure up to Rs 10 lakh, however, witnessed a slight
deterioration at 5.8% in March 2025 compared to 5.1% in March 2024. Similarly, the borrower segment with exposure from Rs 10 lakh to Rs 50 lakh also saw a marginal rise in the delinquency level to 2.9% as compared to 2.8% in March 2024.

MSME Credit Growth Momentum Remains Robust
The demand for commercial credit, which is measured by the number of enquiries, grew 11% YoY in the quarter ending March 2025. Commercial credit supply (by value) grew 3% YoY in FY 2024-25.

However, in the last quarter (Jan-Mar 2025) there was a decline of 11% YoY possibly due to higher credit concerns among lenders arising from increased external headwinds. Despite this slowdown in origination, credit extended through new cash credit facilities remained resilient with 7% YoY growth for
the same quarter. While the share of New-to-Credit (NTC) MSME borrowers to total new loan originations continued to be strong at 47% as of March 2025, it was lower than the share of 51% one year prior.

In the quarter ending March 2025, public sector banks offered 60% of NTC originations. The trade sector contributed the greatest proportion of NTC borrowers at 53%, while the manufacturing sector saw the highest YoY growth (70%) in the number of NTC borrowers originating a commercial loan.

The manufacturing sector had a greater share of the origination value, at 34%, despite contributing to only 23% of all new loans disbursed in the quarter ending March 2025. However, the share of originations by value to the manufacturing sector has declined steadily over the last two years and shifted in favor of professionals and other services and other sectors, which now contribute to 36% of all new loans disbursed by value, up by five percentage points in the last four years.

Maharashtra, Gujarat, Tamil Nadu, Uttar Pradesh and Delhi continued to dominate commercial lending, together accounting for 48% of the value of overall originations in the quarter ending March 2025. While the manufacturing sector had the greatest share of originations in Maharashtra, Gujarat, Tamil Nadu and Delhi, Uttar Pradesh had the most originations to the trade sector.

Manoj Mittal, Chairman and Managing Director, Small Industries Development Bank of India (SIDBI) said: “The MSME sector plays a crucial role in generating employment opportunities and contributes to export growth. Though the credit flow to the sector has improved over the years, the sector still has an addressable credit gap. Providing support to MSMEs can help the sector’s growth and aid the overall economic growth of our country. By fostering innovation, enhancing skill development programs and improving access to financial resources, we can empower MSMEs to become more competitive on a global scale. This in turn will bolster the sector and drive sustainable economic development and inclusive growth across the nation.”

Bhavesh Jain, MD and CEO, TransUnion CIBIL said: “For MSMEs to achieve sustainable growth, it is imperative that they receive assistance in accessing formal credit and guidance in debt management. Additionally, fluctuations in the business cycle affect these enterprises disproportionately, as they often lack the financial reserves or support necessary to navigate adverse conditions. Therefore, it is crucial to extend support to this sector and equip them with tools for effective financial management.”