MSME Loan Growth Slows: Stress Signs Emerge

Mumbai, Jun 2 (PTI) India's MSME credit growth has moderated, with early signs of stress emerging in micro businesses and manufacturing-related sectors amid global uncertainty, according to a report.

The MSME exposure (MSMEx) portfolio outstanding stood at around Rs 46 lakh crore as of April 2026, registering a 12.8 per cent year-on-year growth, supported by improved asset quality, broader sectoral participation and policy support measures, credit information company CRIF High Mark said in its latest report.

However, the pace of growth slowed considerably, with portfolio outstanding rising only 3.1 per cent between December 2025 and April 2026, compared to 9.7 per cent growth in the corresponding period a year ago. Active loans declined 3.5 per cent during the period against a 3 per cent growth in the year-ago period.

The report noted that while the sector has remained resilient amid geopolitical disruptions, supported by domestic demand and continued credit flow, early-stage stress signals are becoming visible in select borrower segments, industries and lender groups.

Micro businesses, which account for nearly 86 per cent of active MSME loans, showed relatively higher vulnerability, with early-stage delinquency, measured as portfolio at risk (PAR) in the 31-90 day bucket, standing at 2.7 per cent in April 2026, compared to 1.5 per cent for small businesses and 0.8 per cent for medium enterprises.

Further, micro active loans contracted 4.6 per cent between December 2025 and March 2026 against a 1.5 per cent growth in the corresponding period of the previous year, although some stabilisation was visible in April, the report noted.

Among sectors, manufacturing and trade, accounting for nearly 60 per cent of the MSME portfolio outstanding, witnessed slower credit momentum.


Manufacturing credit growth eased to 4.3 per cent between December 2025 and March 2026, down from 10.4 per cent in the year-ago period, and further contracted 3.1 per cent between March and April 2026. The report attributed this to seasonal factors.

Within manufacturing, supply chain-linked sectors, such as shipping and transport, food processing, and auto and ancillaries, saw a portfolio outstanding declining in mid-teens during the December-April period.

The report also flagged a rise in early-stage stress in manufacturing, with PAR 31-90 inching up to 1.8 per cent in April 2026 from 1.6 per cent in March, although broader portfolio quality indicators remained stable.

Across the MSME portfolio, delinquency in the PAR 90+ bucket improved marginally to 7.8 per cent in April 2026 from 8.1 per cent a year ago.

On the lender side, lending momentum moderated across categories, particularly among PSU banks and NBFCs.

MSME lending by PSU banks declined 0.2 per cent between December 2025 and March 2026 against a 3.5 per cent growth in the same period last year, while NBFC lending contracted 1.6 per cent compared with 6.4 per cent growth a year ago.

Despite the moderation, the report said the MSME sector has so far navigated global uncertainty relatively well, aided by domestic demand resilience, diversified lender participation and government-backed support measures, while cautioning that emerging stress pockets warrant close monitoring.