MSME Credit Demand at an All-Time High While Delinquencies Decline

Mumbai, 23 March 2023: Insights from the latest edition of TransUnion CIBIL-SIDBI MSME Pulse Report show that with lenders being able to supply timely credit to resilient MSMEs, the sector is on an accelerated growth trajectory. The report also indicates benchmark credit growth in the micro segment owing to an improvement in lender confidence. The measures on formalization of MSMEs and adoption of digital platforms by lenders has enabled them to access granular data on enterprises and improved their confidence for lending, especially to the micro1 segment of MSMEs, informs the report.

Data from the report shows that credit demand (measured in terms of credit inquiry volumes) is correlated to the improvement in business activity and grew at 1.29 times year-over-year (YoY) in the quarter ending September 2022, while credit supply remained stable with disbursement growing by 24% YoY. Micro, small and medium enterprises grew at 54%, 23% and 8% in disbursements YoY, respectively.

Overall, MSME credit exposure is at ₹ 22.9 lakh crores as of September 2022, reflecting a YoY growth rate of 10.6%. Bank type wide analysis of credit exposure shows that public sector banks hold ₹ 7.9 lakh crore, private banks hold ₹ 10.1 lakh crore, and non-banking financial companies (NBFCs) account for ₹ 3.1 lakh crore of share. There are ~77 lakh total number of live MSME borrowers growing at 11% YoY. Small segment enterprises comprised the highest proportion in the MSME credit book at ₹ 9.5 lakh crores, while micro and medium enterprises hold ₹ 5.8 lakh crores and ₹ 7.6 lakh crores, respectively.

MSME lending continues to be concentrated in states that have higher industrialization. The top ten states based on current outstanding MSME lending balances are Maharashtra, Gujarat, Tamil Nadu, Uttar Pradesh, Delhi, Karnataka, Rajasthan, West Bengal, Telangana & Haryana. These top ten states constituted 72% of the MSME outstanding balance as of September 2022. Of these ten states, Gujarat and Haryana had the highest growth rate of 15% and 14%, respectively. On the other hand, Rajasthan and Gujarat had the lowest delinquency rate of 1.8% and 1.85% respectively.

Speaking on the findings of this edition of the MSME Pulse, Mr. Sivasubramanian Ramann, Chairman and Managing Director, SIDBI, said: “The progressive reforms introduced by the government for MSME sector resurgence have borne fruit as reflected in the vigorous business activity and improved credit uptake by enterprises across all the segments. We would encourage the credit industry to duly support this increasing demand by providing timely access to credit opportunities for MSMEs, thereby contributing to the sustained growth of the sector and the economy to meet the government’s USD 5 trillion economy objective.”

Adding to this, the Managing Director and CEO of TransUnion CIBIL, Mr. Rajesh Kumar, said: “Demand for credit from the MSME sector is at an all-time high and supply by the credit industry remains stable while delinquencies have declined. These findings prove that the credit industry has been able to wield the power of insights and data analytics to identify deserving MSMEs and drive access to credit opportunities astutely across business sectors and geographies. The rapid pace of innovations driven by the government, regulator, and the lending ecosystem has significantly fortified the MSME sector to continue its high growth trajectory. These innovations have provided capabilities for triangulating the power of financial, income and trade information so that credit institutions can get a unified view of the business entity, enabling improved risk differentiation for underwriting MSME loans.”

Exhibit 1. Mapping India’s MSME credit through the MSME Pulse lens

Demand (Commercial Credit Inquiry Volumes)

FY 22-Q2

FY 23-Q2

YoY Growth (%)

Indexed to: 100



Supply (MSME Disbursement Amounts - In ₹ Lakh Crore)

FY 22-Q2

FY 23-Q2

YoY Growth (%)




Growth (Balance-Sheet MSME Credit Exposure - In ₹ Lakh Crore)

FY 22-Q2

FY 23-Q2

YoY Growth (%)




Performance (Delinquency Rates)

New Definition of Delinquency Rate*

FY 22-Q2

FY 23-Q2

YoY Change (%)




NPA Rate#

FY 22-Q2

FY 23-Q2

YoY Change (%)




* The MSME portfolio excludes ~ ₹ 2.4 lakh crores of default cases beyond 720 days past due (DPD) /loss /doubtful category. With this edition of MSME Pulse, a new definition for 90+ DPD is being introduced, which excludes legacy accounts with DPD beyond 720 days or reported as loss/doubtful.

# Non-Performing Asset (NPA) Rate is 90+ DPD to infinity.

In this edition of the MSME Pulse, a new definition for delinquency rates is being introduced which excludes legacy accounts with DPD beyond 720 days or reported as loss/doubtful. The overall delinquency rate on MSME portfolio was 3.0% for September 2022 (FY23-Q2), down from 4.4% during the same period last year (FY22-Q2). This reduction is due to a drop in delinquency rates across micro, small and medium segments. These findings emphasize that improved credit flow to the MSME segment can help in stabilizing the sector and provide much needed financial support to fortify it further.

Delinquency rates have dropped YoY across private sector banks, public sector banks and NBFCs. Private sector banks showed the highest drop in delinquency – from 2.8% in the quarter ending September 2021 to 1.5% during the same period in the year 2022. For Public Sector Banks, delinquency rates dropped from 5.3% to 3.9% and for NBFCs from 5.9% to 4.5% during the same period.

This edition of the MSME Pulse also includes a study on the growth in the micro segment of MSMEs. Its findings show that, disbursements to the micro segment grew by 54% YoY and credit balances grew by 13% YoY as of September 2022. In comparison, disbursement growth of 24% and credit balances growth of 10.6% was observed on the overall MSME portfolio. Very small, Micro1 and Micro2 segments showed YoY balance growth of 20%, 15% and 11%, respectively. Interestingly, more than 50% of new originations came through new-to-credit (NTC) borrowers in this segment – which emphasizes the importance of alternate data sources for effective underwriting. Even though the micro and small enterprise segments are dominant in the market, less than half of the micro units have access to formal credit, marking significant opportunity for credit institutions to accelerate MSME lending.

1       Commercial loans classified on the basis of credit exposure aggregated at entity level, Micro: exposure up to ₹ 1 crores Very Small: < ₹ 10 lakhs; Micro1: Exposure between ₹ 10 lakhs and ₹ 50 lakhs; Micro2: Exposure between ₹ 50 lakhs and ₹ 1 crores.

About TransUnion CIBIL                                                             

India’s pioneer information and insights company, TransUnion CIBIL makes trust possible in the modern economy. We do this by providing an actionable picture of each person so they can be reliably represented in the marketplace.  As a result, businesses and consumers can transact with confidence and achieve great things. We call this Information for Good®. TransUnion CIBIL provides solutions that help create economic opportunity, great experiences and personal empowerment for millions of people in India. We serve the financial sector as well as MSMEs, corporate and individual consumers. Our customers in India include banks, financial institutions, NBFCs, housing finance companies, microfinance companies and insurance firms.

For more information visit:  www.transunioncibil.com

About SIDBI                                                             

Small Industries Development Bank of India has been established under an Act of the Parliament in 1990. SIDBI is mandated to serve as the Principal Financial Institution for executing the triple agenda of promotion, financing and development of the Micro, Small and Medium Enterprises (MSME sector) and co-ordination of the functions of the various Institutions engaged in similar activities. Over the years, through its various financial and developmental measures, the Bank has touched the lives of people across various strata of the society, impacted enterprises over the entire MSME spectrum and engaged with many credible institutions in the MSME ecosystem. Under Vision 2.0, SIDBI has spearheaded various Initiatives to address the Information Asymmetry in MSME sector like ‘MSME Pulse’, the health tracker of MSMEs and ‘CriSidEx’, for gauging the MSE sentiments & aspirations and ‘Fintech Pulse’, for credit data insights on Fintech lending segment, ‘Microfinance Pulse’, insight report on Microfinance sector and ‘Industry Spotlight’, a comprehensive report on major industry sectors.