India’s small business credit environment was strengthening while remaining resilient according to CRIF–SIDBI Small Business Spotlight Report (December 2025).
The credit portfolios continued to expand, formalisation was progressing gradually, more lenders were participating actively, and asset quality was remaining healthy, as per the report.
The report analysed data in small businesses with credit exposure of up to ₹5 crore.
According to the report, the aggregate small business credit exposure had reached ₹46 lakh crore, up 16.2% year-on-year (YoY).
Active loan accounts had grown by 11.8% to 7.3 crore backed by policy support and multiple government credit schemes for MSMEs.
Sole proprietors continued to dominate the credit ecosystem. They accounted for around 80% of total credit and nearly 90% of borrowers.
The fastest-growing segment was sole proprietors with an entity presence. This segment had grown by 20% YoY led largely by loans against property.
As of September 2025, 23.3 percent of borrowers were new to credit and 12% were new to enterprise borrowing indicating increasing formalisation.
Private banks continued to lead enterprise lending, closely followed by public sector banks. NBFCs were seen steadily increasing their presence, especially among sole proprietors. They accounted for more than 41% of lending in this segment.
For enterprises, working capital loans dominated and accounted for nearly 57% of outstanding credit. Term loans continued to support capital expenditure.
Among sole proprietors, loans against property remained the largest category, followed by business loans and commercial vehicle loans. Unsecured lending had grown by 31% YoY, even amid concerns around stress.
Maharashtra, Tamil Nadu, Uttar Pradesh, and Gujarat led in overall portfolio size. Telangana, Andhra Pradesh, and West Bengal showed strong growth momentum.
Credit penetration beyond the top 100 locations was seen rising, particularly in Uttar Pradesh, Madhya Pradesh, Karnataka, and Tamil Nadu.
Manufacturing continued to lead in absolute credit exposure, while the services sector recorded a growth of 19.6% year-on-year.
Portfolio quality had improved across segments. Loans overdue by 91 to 180 days declined to around 1.4% as of September 2025, from 1.7% in September 2023.
Enterprises continued to show lower risk profiles. Sole proprietors had also seen steady improvement.
The share of very low and low-risk borrowers increased between September 2023 and September 2025, supported by better underwriting practices and wider use of digital data, as per the report.
The report also highlighted Odisha as a focused state. Small business credit in the state grew from ₹0.67 lakh crore in September 2023 to ₹0.96 lakh crore in September 2025, up 17.2% YoY, higher than the national average.
Credit growth in aspirational districts exceeded 22% and showed better delinquency trends. Public sector banks held more than 40% share in the state, while NBFCs were seen expanding rapidly in under-penetrated regions.
The risk profile had improved significantly. The share of very low-risk small enterprises rose from 40.1% in September 2023 to 47.1% in September 2025, opening up further lending opportunities.
Sachin Seth, Chairman, CRIF High Mark and Regional Managing Director – CRIF India and South Asia in a statement said, “Sole proprietors continue to anchor India’s small business credit ecosystem, accounting for close to 80% of the borrower base as of September 2025.”
“At the same time, borrowers with both individual and enterprise credit presence are contributing a steadily rising share of overall credit exposure, and this segment has recorded the strongest growth in exposure over the year,” he said.
“Together, these trends indicate that credit deepening and gradual formalisation are progressing in parallel as small businesses scale,” he added.
Published – December 26, 2025 08:38 pm IST
