A new report from CRIF High Mark reveals that MSME credit growth in India moderated significantly in April 2026, with micro borrowers and manufacturers showing early signs of financial stress amidst global uncertainties.
Key Points
- MSME credit growth moderated to 3.1 per cent between December 2025 and April 2026, a significant slowdown from 9.7 per cent in the previous year.
- Early signs of stress are visible among micro borrowers, with outstanding loans contracting by 3.1 per cent and early-stage delinquencies rising.
- Manufacturing and trade sectors, accounting for over 60 per cent of MSME credit, experienced the sharpest slowdowns in credit growth.
- Public-sector bank portfolios and working-capital loans are also under pressure, showing increased early-stage delinquencies.
- Despite the moderation, the MSME sector is deemed resilient due to strong domestic demand, diversified lender participation, and policy support, though close monitoring is advised.
Loans to small businesses expanded in April but growth moderated amid geopolitical uncertainty, with early stress emerging among micro borrowers and manufacturers, said credit bureau CRIF High Mark in a report on Tuesday.
Working-capital loans and public-sector bank portfolios also came under pressure.
Loans to micro, small and medium enterprises (MSMEs) 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, compared with 3 per cent growth last year. CRIF said the moderation in portfolio growth reflects the "potential impact of global uncertainty on domestic MSME credit supply".
Sectoral Slowdown and Vulnerabilities
The slowdown was sharpest in manufacturing and trade, which together account for more than 60 per cent of outstanding MSME credit. Manufacturing credit growth eased to 4.3 per cent between December 2025 and March 2026 from 10.4 per cent the year before.
Between March and April this year, manufacturing credit contracted 3.1 per cent and trade credit fell 2.1 per cent.
Within manufacturing, shipping and transport, food processing, and auto and ancillary businesses witnessed the sharpest declines.
Loan 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.
These movements "may reflect cyclical factors and merit ongoing observation to gauge their persistence," said CRIF.
Stress Among Micro Borrowers and Public Sector Banks
Outstanding loans to the micro segment, which accounts for nearly 86 per cent of active MSME loans, contracted 3.1 per cent between December and March, compared with growth of 3.4 per cent the previous year.
Active loans in the segment declined 4.6 per cent, compared with 1.5 per cent growth the year before.
CRIF said the overall asset quality is stable, but it had noted a rise in early-stage delinquencies in 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 March 2026 and April 2026," the report said, referring to portfolio at risk.
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 highlighted an increase in stress among public-sector 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".
Resilience Amidst Challenges
The report said the micro segment is 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 public-sector banks and non-banking financial companies 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.
CRIF said the MSME sector remains resilient despite an 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.
It 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.
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