Individual borrowers accounted for 28 per cent of outstanding commercial credit balances as of March 2026, with total commercial credit reaching ₹65.8 trillion across 4.4 crore live loan accounts. Business-purpose loans to individuals have become a significant component of MSME financing, with entrepreneurs accounting for 68 per cent of loan against property balances, 76 per cent of commercial vehicle loans and 67 per cent of unsecured business loan balances. These products, along with term loans, cash credit and overdrafts, constituted 87 per cent of outstanding commercial credit.
The report said 2.8 crore individuals had active business-purpose loans as of March 2026, of whom 43 per cent were early-stage commercial borrowers with less than two years of commercial credit history. Nearly half of NBFCs' commercial loan balances were linked to individual borrowers, highlighting their growing role in financing small businesses.
However, the report flagged emerging stress in parts of the commercial credit portfolio despite overall asset quality remaining stable. Aggregate delinquency, measured as balances overdue by more than 90 days, stood at 1.8 per cent in March 2026. But delinquency in unsecured business loans to commercial entities rose to 7.2 per cent, while the ₹2 lakh-₹10 lakh borrower segment recorded delinquency of 5.6 per cent. Early delinquency trends were also deteriorating, with unsecured business loans to entities originated in the March 2025 quarter recording 2.9 times higher delinquency than the overall portfolio, while the ₹2 lakh-₹10 lakh segment reported 2.1 times higher delinquency.
Commercial lending also showed diverging trends across borrower categories. Credit to entities with exposures of ₹2 lakh-₹10 lakh expanded at a three-year compound annual growth rate of just 5 per cent, the slowest among all segments, whereas borrowers with exposures above ₹10 lakh registered double-digit growth. Public sector banks remained dominant in lending to smaller enterprises, NBFCs expanded their presence in the ₹10 lakh-₹2 crore segment, and private banks continued to lead higher-ticket lending.
"In India's MSME economy, the entrepreneur and the enterprise are often deeply connected, particularly in the early years of business growth. A proprietor may borrow in an individual capacity, but the credit is frequently linked to business activity, working capital needs or asset creation," said Bhavesh Jain, managing director and chief executive officer of TransUnion CIBIL. As businesses scale, their credit requirements evolve from small-ticket working capital to larger sector-specific funding, making it important for lenders to understand borrowers' progression from individual to entity-level credit, he added.
The report also pointed to significant headroom for expanding formal MSME credit. Of India's 8.7 crore registered MSMEs, only 3.6 crore had ever accessed formal credit as of March 2026, implying credit penetration of about 41 per cent. The share of new-to-credit entities in annual loan originations declined to 42 per cent in FY26 from 52 per cent in FY23, indicating a slowdown in first-time borrower acquisition even as a large untapped market remains. Sectorally, textiles, professional services and wholesale trade were dominated by the ₹10 lakh-₹2 crore exposure segment, with Maharashtra and Gujarat emerging as key manufacturing credit hubs.
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