Geopolitical uncertainty slows MSME credit growth: CRIF High Mark

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

India's micro, small and medium enterprise (MSME) credit portfolio continued to expand in April, but growth momentum has slowed sharply amid geopolitical uncertainty, with early-stage stress beginning to emerge in micro borrowers, manufacturing businesses, public sector bank portfolios and working-capital loans, according to a report by credit bureau CRIF High Mark.

 

The MSME portfolio outstanding stood at about Rs 46 trillion at the end of April 2026, up 12.8 per cent year-on-year (Y-o-Y). However, growth between December 2025 and April 2026 slowed to 3.1 per cent, compared with 9.7 per cent in the corresponding period a year ago. Active loans declined 3.5 per cent during the period against 3 per cent growth last year.

 

 

The bureau said the moderation in portfolio growth reflects the "potential impact of global uncertainty into domestic MSME credit supply". The slowdown has been most visible in manufacturing and trade, which together account for over 60 per cent of MSME credit outstanding.

 

Manufacturing credit growth eased to 4.3 per cent between December 2025 and March 2026 from 10.4 per cent in the year-ago period. Between March and April this year, manufacturing credit contracted 3.1 per cent, while trade credit fell 2.1 per cent.

 

Within manufacturing, shipping and transport, food processing, and auto and ancillary businesses witnessed the sharpest declines. Portfolio outstanding in food processing fell 17.2 per cent between December 2025 and April 2026, while shipping and transport and auto and ancillary businesses saw declines of 14.6 per cent and 14 per cent, respectively.

 

The report noted that these movements "may reflect cyclical factors and merit ongoing observation to gauge their persistence".

 

The micro segment, which accounts for nearly 86 per cent of active MSME loans, has also come under pressure. Micro portfolio outstanding contracted 3.1 per cent between December and March, compared with growth of 3.4 per cent in the corresponding period last year. Active loans in the segment declined 4.6 per cent against growth of 1.5 per cent a year earlier.

 

While overall asset quality remains stable, CRIF High Mark flagged a rise in early-stage delinquencies across several pockets of the MSME ecosystem.

 

"Portfolio health metrics point to resilience. PAR 31-90 remained broadly stable, PAR 90+ improved slightly Y-o-Y, and delinquencies moderated across most buckets. That said, early delinquency is inching up in specific segments between Mar'26 and Apr'26," the report said.

 

Among micro borrowers, delinquency in the 91-180 days past due bucket rose from 1.1 per cent in March to 1.4 per cent in April. The report also highlighted an increase in stress among PSU bank portfolios, where PAR 31-90 rose from 2.7 per cent to 3 per cent during the month.

 

Manufacturing showed a similar trend, with PAR 31-90 increasing from 1.6 per cent to 1.8 per cent between March and April. Stress also inched up in cash-credit facilities, where PAR 31-90 rose from 1.6 per cent to 1.9 per cent, making working-capital loans one of the key monitorable segments.

 

The report said the micro segment continues to remain the most vulnerable. As of April 2026, PAR 31-90 stood at 2.7 per cent for micro borrowers, compared with 1.5 per cent for small businesses and 0.8 per cent for medium businesses, "underlining its greater vulnerability to shocks".

 

Lending momentum weakened across lender categories as well. Between December 2025 and March 2026, MSME portfolios of PSU banks and non-banking financial companies (NBFCs) contracted 0.2 per cent and 1.6 per cent, respectively, compared with growth of 3.5 per cent and 6.4 per cent in the corresponding period last year. Growth in private bank portfolios slowed to 5.3 per cent from 16.4 per cent.

 

The bureau nevertheless said the sector remains resilient despite the uncertain external environment.

 

"Across the analysis, one overarching message emerges: the sector has demonstrated resilience in the face of geopolitical disruptions, aided by strong domestic demand, diversified lender participation and continued policy support," it said.

 

At the same time, CRIF High Mark cautioned that "slower portfolio growth, stress in select subsectors and lender groups, and rising early-stage delinquencies in certain borrower segments" warrant close monitoring by lenders and policymakers.