India's Small Business Credit Grows to Rs 49.2 Lakh Crore

The report further added that sole proprietors i.e. individual business borrowers continue to drive the credit growth of small business loans, accounting for 80 per cent of the portfolio and over 87 per cent of the active loans (inclusive of those with entity presence).

Loan against property (LAP) continues to be the dominant product in the consolidated portfolio with 27.1 per cent share, followed by business loans (24.8 per cent) and working capital products (22.8 per cent).

LAP share grew from 25.5 per cent in March 2025 to 27.1 per cent in March 2026, highlighting the continuing importance of secured credit in the MSME sector.

At the national level, the top 10 states account for 72 per cent of POS, underscoring small credit concentration in some regions.

Andhra Pradesh and Uttar Pradesh led state-wise portfolio growth with 16.5 per cent and 18.5 per cent year-on-year growth share.

The report showed that Tamil Nadu emerged as a mature and resilient small business credit market, with portfolio outstanding rising 11.6 per cent YoY to Rs 4.6 lakh crore, while maintaining improving asset quality.

Enterprise term loan growth moderated to 4.7 per cent YoY, highlighting opportunities for lenders to finance MSME technology upgradation, sustainability initiatives and capacity expansion.

Manufacturing accounted for 31.3 per cent of enterprise term loan share, while services and trading together formed 47.6 per cent, according to the report.

It added that the growth in manufacturing linked enterprise term loans was concentrated in core districts, with Bengaluru, Jaipur, Pune, and Rajkot driving key growth and trends.