MSME Credit Growth Rises To 23.5% In 2025-26: RBI Annual Report

New Delhi, May 29 (KNN) The Reserve Bank of India in its Annual Report 2025-26 said bank credit growth remained strong during the financial year, with lending to the micro, small and medium enterprises (MSMEs) sector witnessing accelerated expansion amid continued policy focus on financial inclusion and easier credit access.

According to the report, overall non-food credit growth stood at 15.9 percent as of end-March 2026, with industrial credit maintaining robust momentum since May 2025, largely driven by stronger lending to MSMEs.

Industrial, Services Credit Maintain Strong Momentum

Among industrial sub-sectors, credit growth remained resilient in infrastructure, engineering, basic metals and metal products, chemicals and petroleum-related industries.

Credit growth to the services sector also sustained robust double-digit growth, supported by healthy expansion in trade, commercial real estate and a sharp recovery in lending to non-banking financial companies (NBFCs) since October 2025.

The RBI noted that the weighted average lending rate (WALR) on fresh rupee loans moderated across all sectors during 2025-26. The sharpest decline was recorded in rupee export credit, followed by education, professional services, MSMEs, trade, large industries and housing loans.

RBI Expands MSME Outreach, Enhances Collateral-Free Loan Limit

As part of its financial inclusion agenda, the central bank highlighted several initiatives aimed at improving MSME outreach and easing access to formal finance.

Effective April 1, 2026, the collateral-free loan limit for micro and small enterprises was enhanced from Rs 10 lakh to Rs 20 lakh to facilitate better credit access, support entrepreneurship and strengthen last-mile lending for businesses with limited collateral availability.

The RBI also expanded its MSME outreach framework through district-level MSME SAMVAAD meetings, supplementing the existing MSME town hall initiatives conducted by regional offices to improve awareness regarding banking facilities and address financing issues faced by small businesses.

The report stated that more than 80 percent of districts across the country, covering 710 districts, achieved 100 percent coverage under the EDDPE programme as of March 31, 2026.

MSME Credit Growth Accelerates To 23.5 Percent

Outstanding bank credit to the MSME sector by scheduled commercial banks (SCBs) registered year-on-year growth of 23.5 percent during 2025-26, compared with 18.3 percent in the previous year.

The central bank said increasing credit flow to MSMEs continues to remain a key policy priority for both the RBI and the Government of India.

For 2026-27, the RBI has proposed a review of the framework for revival and rehabilitation of MSMEs to make the resolution of financial stress in small businesses more effective and timely.

Basel III Framework Introduces Lower Risk Weights For MSMEs

The report also highlighted the issuance of final directions under the Basel III capital charge framework for credit risk on April 27, 2026, after stakeholder consultations.

The revised framework introduces more granular and risk-sensitive approaches for risk-weighting, including lower risk weights for unrated MSMEs, expanded MSME coverage and revised credit conversion factors for off-balance sheet exposures. The new standards will come into effect from April 1, 2027.

(KNN Bureau)