MSME Lending

FlexiLoans co-founder Ritesh Jain discusses MSME credit, regulatory changes, flexible working capital and the growing role of co-lending

The industry body is collating views from NBFCs before submitting feedback to the RBI, with lenders warning that the proposed restriction could favour banks

The country's largest lender, State Bank of India (SBI), used artificial intelligence to underwrite nearly Rs 1 lakh crore in MSME loans of up to Rs 5 crore each during 2025-26, a senior bank official said on Wednesday. "In FY26, in 12 months time, we are able to underwrite loans up to Rs 5 crore, both covering the new-to-bank customers, as well as existing customers. Almost Rs 1 lakh crore we were able to underwrite," SBI Managing Director Rama Mohan Rao Amara said at the annual FIBAC event here. He added that the bank is also deploying artificial intelligence, including Large Language Models (LLMs), to automate processing of cheques up to Rs 10,000. The use of AI has helped free up the bandwidth of relationship managers, who earlier spent considerable time collecting data and carrying out preliminary analysis, the official said. Cheques of up to Rs 10,000 account for around 25 per cent of the bank's cheque volumes, and the AI model can read the cheque and verify mandatory fields

In 2025-26, micro and small enterprises, for the first time, overtook agriculture as the single-largest component of PSL

CRIF High Mark said MSME credit growth moderated amid global uncertainty, while early-stage stress surfaced among micro borrowers, manufacturing firms and working-capital loans

Large microfinance institutions are diversifying into retail and MSME lending as regulatory changes and recent sector stress reshape growth strategies

The Aditya Birla Group's financial services arm will use the capital raised from promoters and IFC to strengthen lending businesses and accelerate digital growth initiatives

A report by the Economic Advisory Council to the Prime Minister has flagged sharp regional imbalances in priority sector lending and called for a more equity-focused PSL framework

Indian banks relied heavily on MSMEs to drive credit growth in FY26, and were bracing for stress in the segment in FY27 due to the West Asia situation

India's small business credit portfolio remains resilient at ₹47.8 lakh crore, though growth moderated amid a higher base, even as smaller-ticket loans gained share

MSMEs see higher working capital drawdowns as West Asia conflict strains cash flows, with delayed receivables and rising costs expected to impact portfolios in coming quarters

Mandating such a shift may not solve the problem. Ignoring information gaps and banning collateral risks weakening the financial system and could reduce, not expand, credit supply

DEG and Citi have extended a $76 million co-financing facility to Shriram Finance to expand lending to MSMEs, smallholder farmers, women borrowers, and electric vehicle buyers

Bank credit rises 14.6% year-on-year in fortnight ended January 31, while deposit growth remains firm at 12.5%, RBI data show

Union Budget 2026 stays focused on fiscal prudence, targets a 4.3% deficit, sustains ₹12.2 trillion capex, and backs rare earths, freight corridors, waterways and data centres, writes Madan Sabnavis

Scheme will also serve women entrepreneurs and help economic growth, says state government

The increase in lending to the MSME sector reflects robust credit demand from small businesses as well as improving credit access supported by the increasing digital lending initiatives

Bankers highlighted the need for consent-based APIs and structured data to improve MSME lending, addressing working capital, technology, and credit guarantee challenges

Credit growth to small and medium enterprises is outpacing all other sectors, but the test of asset quality lies ahead

With assets under management of over ₹12 billion, Infinity offers loans to entrepreneurs and small business owners in India's smaller cities, supporting them in achieving their growth goals