MSME delinquencies fall to five-year low: Report

Bengaluru: The commercial credit portfolio for India’s micro, small and medium enterprises (MSMEs) grew 13 per cent year-on-year (YoY), with the overall credit exposure increasing to Rs 35.2 lakh crore as of March-end 2025, compared to Rs 31 lakh in the previous year.

This trend was largely driven by an increase in credit supply to existing borrowers, according to a report by TransUnion CIBIL and Small Industries Development Bank of India (SIDBI), out on Thursday.

The MSME sector includes borrowers with credit exposures up to Rs 50 crore.

The overall balance-level delinquencies fell to 1.8 per cent, the lowest in five years. It marks a 35 basis point (bp) drop from 2.1 per cent in March 2024. This is measured as 90 to 720 days past due (DPD) date and classified as ‘sub-standard’.

While the share of new-to-credit (NTC) MSME borrowers to total new loan originations continued to be strong at 47 per cent as of March 2025, it was lower than the share of 51 per cent one year prior.

In the quarter ending March 2025, public sector banks catered to 60 per cent of NTC borrowers. Most NTC borrowers (53 per cent to be precise) were from the trade sector.

However, the highest volume growth (70 per cent YoY) of this segment of borrowers was seen in the manufacturing sector. Yet, in terms of value the sector’s share in MSME loans declined over the past two years, shifting in favor of professionals and other services.

Manoj Mittal, Chairman and Managing Director, SIDBI said, “Though the credit flow to the MSME sector has improved over the years, the sector still has an addressable credit gap.”

Bhavesh Jain, MD and CEO, TransUnion CIBIL said, "For MSMEs to achieve sustainable growth, it is imperative that they receive assistance in accessing formal credit and guidance in debt management. Additionally, fluctuations in the business cycle affect these enterprises disproportionately, as they often lack the financial reserves or support necessary to navigate adverse conditions."