India’s commercial credit market has grown into a Rs 65.8 lakh crore ecosystem, but the benefits have not yet reached most registered MSMEs. According to the latest MSME Pulse Report by TransUnion CIBIL and SIDBI, only 41% of India’s 8.7 crore registered MSMEs have ever accessed formal credit, highlighting a wide financing gap even as lending activity expands.
Credit Growth Is Changing
The report shows that individual entrepreneurs are playing a bigger role in business lending, with loans to individuals growing faster than loans to enterprises over the past three years. Individual commercial credit has expanded at a 22% CAGR, compared with 14% for enterprise credit, reflecting how many business owners are borrowing in their personal capacity rather than through formal enterprise structures.
That shift also suggests that credit access is becoming more closely tied to entrepreneurial activity, especially in smaller businesses and self-employment-led models. But it also points to a market where formal MSME borrower growth is still not keeping pace with overall lending.
New Borrowers Are Slowing
One of the more concerning signals in the report is the decline in new-to-credit, or NTC, enterprises in annual originations. Their share has fallen from 52% in FY23 to 42% in FY26, which suggests lenders are focusing more on existing borrowers than bringing first-time MSMEs into the system.
The report also notes that nearly 75% of new borrowers in the Rs 2 lakh to Rs 2 crore exposure band already had retail credit experience. That means personal credit histories are increasingly being used to underwrite business loans, especially for smaller-ticket borrowers.
Lending Patterns Differ By Segment
The report finds that public sector banks continue to dominate lending below the Rs 10 lakh range, while NBFCs have expanded strongly in the Rs 10 lakh to Rs 2 crore segment. NBFCs have gained six percentage points of market share in that category since March 2023, helped by secured lending, longer-tenure products and borrower graduation from individual to enterprise credit.
Private banks, meanwhile, remain strongest in larger exposures above Rs 2 crore, where they account for 46% of balances. The overall lending picture is therefore highly segmented, with different institutions serving different parts of the MSME market.
Stress Remains Contained
Despite the growth in credit, portfolio quality remains broadly stable. The report says aggregate 90+ days past due balances were 1.8% as of March 2026, which suggests overall commercial lending is still holding up well.
Even so, some stress pockets are emerging. Unsecured business loans are showing early delinquency at 2.9 times the industry average, while enterprise borrowers with exposure between Rs 2 lakh and Rs 10 lakh are also seeing higher delinquency levels than the wider portfolio.
What Comes Next
The report suggests that the next phase of MSME credit expansion will depend on better integration between consumer and commercial credit data, more specialised underwriting models and wider formalisation of MSMEs. States with lower credit penetration and fewer new-to-credit borrowers may offer the biggest growth opportunity for lenders.
The larger challenge is clear: while commercial credit is growing quickly, formal access is still missing for the majority of registered MSMEs. Closing that gap will be one of the most important steps in strengthening India’s small business economy.