MSME Credit Growth Slows Down Amid Persistent Uncertainties: Report

New Delhi, Jun 2 (KNN) India’s micro, small and medium enterprise (MSME) credit portfolio continued to grow in April 2026, but at a slower pace, as global uncertainties began to affect lending momentum, according to a report by credit bureau CRIF High Mark.

The total MSME credit outstanding stood at around Rs 46 trillion at the end of April 2026, marking a 12.8 per cent year-on-year increase. However, growth between December 2025 and April 2026 slowed to 3.1 per cent, compared to 9.7 per cent in the same period last year. The number of active loans declined by 3.5 per cent, reversing the 3 per cent growth seen a year earlier.

Sectoral Trends and Slowdown

The moderation in growth was most visible in manufacturing and trade sectors, which together account for over 60 per cent of MSME credit. Manufacturing credit growth dropped to 4.3 per cent from 10.4 per cent a year ago and contracted by 3.1 per cent between March and April 2026. Trade credit also declined by 2.1 per cent during the same period.

Within manufacturing, segments such as food processing, shipping and transport, and auto and ancillary industries saw notable declines. Credit in food processing fell by 17.2 per cent, while shipping and transport and auto-related businesses declined by 14.6 per cent and 14 per cent, respectively.

Pressure on Micro Segment

The micro segment, which makes up nearly 86 per cent of active MSME loans, showed signs of stress. Its outstanding portfolio shrank by 3.1 per cent between December and March, compared to growth in the previous year. Active loans in this segment also fell by 4.6 per cent.

Asset Quality and Emerging Risks

Overall asset quality remained stable, but early-stage delinquencies increased in some segments. Among micro borrowers, loans overdue by 91–180 days rose from 1.1 per cent in March to 1.4 per cent in April. Public sector bank portfolios also showed rising stress, with overdue loans in the 31–90 day category increasing to 3 per cent.

Manufacturing and working-capital loans, particularly cash-credit facilities, also recorded a rise in early delinquencies, indicating potential pressure points.

Lender Trends and Outlook

Credit growth weakened across lender categories. MSME portfolios of public sector banks and non-banking financial companies contracted during the December–March period, while growth in private banks slowed significantly.

Despite these challenges, the report noted that the MSME sector remains broadly resilient, supported by domestic demand, diversified lending sources and policy measures. However, it cautioned that slower growth and rising early stress indicators will require close monitoring by lenders and policymakers.

(KNN Bureau)