Credit to micro enterprises grew 28.8% year-on-year as of March 2026, making them the fastest-growing borrower category within the MSME segment, according to the Reserve Bank of India’s Financial Stability Report, June 2026.
The growth was higher than the 19.4% increase in credit to small enterprises and 13.5% growth in lending to medium enterprises. Overall MSME credit expanded 22.8% during the period.
The data points to increasing formal credit activity among smaller businesses, including retailers, traders, manufacturers and self-employed entrepreneurs. Factors such as greater use of digital payments, GST records and electronic banking transactions are providing lenders with additional information to assess businesses that may have limited collateral or formal credit histories.
According to the RBI’s activity-wise analysis, retail trade accounted for 20.9% of the MSME portfolio of public and private sector banks covered in the assessment. Engineering and machinery accounted for 4.5%, followed by agro products and forestry at 4.4%, and tourism, hotels and restaurants at 2.1%. Other activities accounted for 68.1%.
The growth in MSME lending was accompanied by an improvement in recognised asset quality. The gross non-performing asset ratio for the overall MSME portfolio declined to 2.8% in March 2026. The ratio stood at 2.4% for MSME industry and 3% for MSME services.
However, early signs of repayment stress remain higher among micro enterprises. The SMA-1 ratio stood at 2.4% for micro enterprises, compared with 0.9% for small enterprises and 0.4% for medium enterprises.
Separately, BLS E-Services said it facilitated loan disbursements of more than ₹36,800 crore to around four lakh customers during FY25-26, nearly three times the amount recorded in the corresponding previous period. The company said business and MSME loans, along with personal loans, were among the largest contributors.
Lokanath Panda, Chief Operating Officer, BLS E-Services, said the growth in micro-enterprise credit reflected an opportunity to expand formal financing to smaller businesses while maintaining appropriate credit assessment.