Indian MSMEs See Staggering ₹40 Lakh Crore Credit Boom: What's Driving the Surge?

India's Micro, Small, and Medium Enterprises (MSMEs) are experiencing an unprecedented surge in credit, with the market expanding by a remarkable 25% to ₹40.4 lakh crore as of March. This impressive growth isn't by chance; it's the direct result of a powerful trifecta: robust government policies, accelerated digitalization, and a relentless drive for financial inclusion.

According to a recent MSMEx Spotlight Report from credit bureau CRIF High Mark, this substantial increase highlights a dynamic shift in India's financial landscape. The report, unveiled on Thursday, offers a deep dive into critical changes in credit exposure, lender behaviors, borrower trends, and how credit is distributed across various sectors. It paints a clear picture of an ecosystem rapidly moving towards greater formalization and enhanced resilience.

Who's Lending and Who's Borrowing?

Public sector banks are at the forefront of lending to micro businesses, commanding a significant 45% market share. Meanwhile, private banks have carved out their dominance in the small and medium business segments.

Interestingly, Non-banking financial companies (NBFCs) are steadily expanding their presence across all segments. This growth is largely fueled by supportive regulations that categorize their lending to small enterprises under priority sector norms, effectively encouraging more credit flow to these vital businesses.

When we look at the types of MSMEs receiving credit, small exposure businesses hold the largest share of outstanding credit value at 40%. However, micro exposure businesses lead overwhelmingly in terms of the sheer volume of active loans, accounting for an impressive 81.1%.

Proprietorships continue to be the backbone of micro exposure businesses, making up 62.8% of these entities. A significant portion of these loans—over 50% of outstanding credit—are working capital loans, underscoring the everyday operational needs of these enterprises.