Summary of this article
Small business credit crosses Rs 46 lakh crore nationwide
Private banks lead lending, NBFCs expand reach rapidly
Asset quality improves as formalisation brings new borrowers
Credit outstanding to small businesses increased to an all-time high of Rs 46 lakh crore, up 16.2 per cent year-on-year (y-o-y), said the second edition of the Small Business Spotlight Report by CRIF High Mark and the Small Industries Development Bank of India. The report tracks enterprises with total credit exposure of up to Rs 5 crore and underlines stable growth across regions, borrower types and loan products.
Active loan accounts grew 11.8 per cent to 7.3 crore, indicating sustained demand for formal credit. Policy support, along with government-backed credit guarantee schemes, has contributed to sustaining lending to micro, small and medium enterprises, the report mentions. Gradual formalisation seems to be in play, as an increasing share of borrowers is entering the credit system for the first time.
Sole Proprietors Dominate the Borrower Base
Sole proprietors continue to form the backbone of small business lending. They account for nearly 80 per cent of the total credit exposure and close to 90 per cent of all borrowers. Among them, borrowers with an established entity presence reported the fastest growth, with credit rising by around 20 per cent year on year, primarily driven by loans against property, which remain one of the most preferred forms of secured borrowings for small business owners.
The data also show signs of increased access to credit. More than 23 per cent of the borrowers were new to credit as of September 2025, while about 12 per cent were new to enterprise borrowing. This means that more informal businesses are becoming part of the formal lending system.
Private Banks Lead, NBFCs Expand Reach
Private sector banks have remained the biggest lenders to small enterprises, followed closely by public sector banks. Non-banking financial companies (NBFCs) have been doing great among sole proprietors in particular and have continued to increase their presence. NBFCs now account for over 41 per cent of lending to sole proprietors, reflecting their role in reaching borrowers who may not meet traditional bank lending criteria.
Working Capital Loans Comprise Majority
Working capital loans are prominent in the product structure, contributing nearly 57 per cent. These loans are largely used in managing daily business expenditures like inventory and operating costs. Term loans are still contributing towards capital expenditure and machinery establishment, as well as enhancing business.
For proprietorships, loans against property are the biggest constituent of borrowings, followed by business loans and commercial vehicle loans. Unsecured lending surged 31 per cent year on year, although lenders remained cautious about potential stress in certain borrower segments.
Regional and Sectoral Trends
The broad credit portfolio is led by Maharashtra, Tamil Nadu, Uttar Pradesh and Gujarat. During this period, states such as Telangana, Andhra Pradesh, and West Bengal exhibited higher growth momentum. Credit expansion beyond the top 100 locations is becoming more visible, especially in Uttar Pradesh, Madhya Pradesh, Karnataka, and Tamil Nadu.
Manufacturing continues to constitute the single largest share of credit exposure, while growth in the services sector was faster and recorded nearly 20 per cent year-on-year growth.
Improvement in Asset Quality
The quality of the asset base was improving across borrower segments. Loans overdue by 91 to 180 days fell to about 1.4 per cent as of September 2025 from 1.7 per cent two years ago. Enterprises continued to show lower risk profiles, while the propensity for sole proprietors also saw steady improvement.
Odisha has been cited as the focused state, with the credit given to small businesses rising to 0.96 lakh crores in September 2025, compared to 0.67 lakh crores two years ago, with the growth rate beating the national average.
