·
Individual borrower business-oriented loans balances grew 1.8 times
between March 2023 and March 2026, outpacing entity borrower balance growth at 1.5
times
·
Substantial
scope for expansion in MSME credit access, with nearly 41% commercial
enterprises having
formal credit access in entity or individual capacity
· Overall commercial portfolio remained stable at 1.8% as of March 2026. The analysis identified
emerging signs of risk in specific borrower segments.
Mumbai : India’s commercial credit market is seeing a shift in borrower
composition, with individual borrowers with business-oriented loans now forming
a meaningful share of overall commercial credit balances, according to the
latest MSME Pulse released by TransUnion
CIBIL and the Small Industries Development Bank of India (SIDBI).
Loans to
individuals accounted for 28% of outstanding commercial balances, while loans
to entities accounted for 72%. Individual borrower balances grew 1.8 times during
the three-year period between March 2023 and March 2026, compared with 1.5
times growth in entity borrower balances during the same period.
The report finds
that outstanding commercial credit stood at ₹65.8 lakh crore as of March 2026,
across 4.4 crore active commercial trades. This is a year-over-year (YoY) growth
of 14% compared to the total outstanding credit of Rs 57.9 lakh crore as of
March 2025.
Chart 1: Individual Business Borrowers Credit Profile
Individual Borrowers
Form a Sizeable Business Credit Segment
As of March 2026,
2.8 crore individual borrowers had active business-oriented loans. Of these
borrowers, 43% were early-stage as commercial entities with credit history of
less than 24 months, highlighting a borrower segment that is active in
business-purpose borrowing while still being relatively new as commercial
entities. Almost half (48%) the share of
the total Non-Banking Financial Companies’ (NBFCs) Commercial Balances
pertained to Individual Borrowers. All other lender categories
have a much lower share, with private
banks the second largest at 24% of the commercial balance share among individual borrowers.
The individual borrower segment has been increasingly visible across key commercial credit products. Loans against
property formed the largest share of outstanding balances for this borrower
group, followed by commercial vehicle loans and unsecured business loans. At a
product level, individual borrowers accounted for 68% of loan against property
balances, 76% of commercial vehicle balances and 67% of unsecured business loan
balances. The report notes that loans against property, commercial vehicle
loans, unsecured business loans, term loans, overdraft and cash credit together
formed ~87% of outstanding commercial credit balances.
Bhavesh Jain, MD
& CEO, TransUnion CIBIL, said: “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. This makes individual
business borrowing an integral part of how commercial credit is evolving, and
it deserves to be understood within the broader MSME credit landscape.
“As MSMEs grow,
their credit needs also change, from small-ticket working capital to larger,
sector-led funding requirements. The real opportunity for the credit ecosystem
lies in understanding this progression with greater clarity, especially as
borrowers move from individual business borrowing to entity-level credit, or
from trade-led borrowing to manufacturing-led expansion.”
Formal Credit Access
Remains a Large Opportunity
The share of
new-to-credit (NTC) entities in origination volumes declined from 52% in FY23
to 42% in FY26, indicating that the pace of first-time formal credit onboarding
has moderated in recent years.
Chart 2: NTC Opportunity Sizing
NTC originations among
commercial entities were concentrated in smaller ticket sizes. The report finds
that 60% of these originations were in the ₹2 lakh to ₹10 lakh ticket-size
segment, while 34% were in the ₹10 lakh to ₹2 crore segment. It also notes that
75% of ₹2 lakh to ₹2 crore NTC entity borrowers had prior retail credit
experience, showing that first-time entity borrowers may enter formal
commercial credit through different borrower pathways.
Emerging Pockets Of
Risk in Specific Borrower Segments
While overall
commercial credit portfolio performance remained stable as of March 2026, the
report indicates elevated
delinquency levels in certain borrower and product segments. Delinquency (measured as share of balances in 90+ Days Per Due (DPD) or
classified sub-standard) in unsecured
business loans to entities stood at 7.2%, up 274 basis points (bps) over three
years. The ₹2 lakh to ₹10 lakh entity borrower segment recorded delinquency of
5.6%, up 111 basis points over the same period.
Signs of stress were also seen in early delinquencies (measured as
accounts ever in 90+ DPD in first 12 months since origination) as well, for
both unsecured business loans to entities and for the ₹2 lakh to ₹10 lakh
entity borrower segment. For originations in the March 2025 ending quarter, for
unsecured business loans to entities, early delinquencies were 2.9 times
higher, while for the ₹2 lakh to ₹10 lakh entity borrower segment, early
delinquencies were 2.1 times higher than the overall early delinquency of 3.4%
for loans to entities originated in the same period.
Sectoral Patterns Point
to Different MSME Credit Structures
The report shows
that commercial credit patterns vary across sectors by exposure size and
geography. Textiles, professional services, wholesale trade and infra-linked
industries are led by the ₹10 lakh to ₹2 crore exposure segment. Maharashtra
and Gujarat the leading states across key industries such as textiles, food
processing. The report identifies manufacturing as a sector with strong
concentration in industrial clusters.
Trade showed a
different pattern, with retail trade anchored in the ₹2 lakh to ₹10 lakh exposure
segment and wholesale trade led by the ₹10 lakh to ₹2 crore segment basis share
of entities with live loans. Uttar Pradesh ranked first in both retail and
wholesale trade counts, while Uttar Pradesh, and West Bengal appeared among the
other leading states. In professional services, the report shows a higher share
of entities in small exposure segments of ₹10 lakh to ₹2 crore, with
Maharashtra, Karnataka and Tamil Nadu among the leading states.
Mr Jain said: “MSMEs
remain central to India’s enterprise base, employment creation and regional
economic growth. As more small businesses seek formal credit, it is important
to recognise the diversity within the MSME segment. A micro enterprise seeking
working capital, a trade borrower operating in a local market and a
manufacturing unit looking to scale will have different credit needs, business
cycles and growth paths. Expanding formal credit access for MSMEs has to go
hand in hand with a deeper understanding of these differences. A more granular
view across sectors, ticket sizes and geographies can help the ecosystem serve
smaller and emerging enterprises while maintaining a focus on sustainable
credit growth.”