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Entrepreneur
11 hours ago
- Business
- Entrepreneur
Credit Uptick Masks Deeper Gaps in MSME Lending
Until lending models evolve to meet the real-world needs of these businesses, especially those outside metro hubs, India's small business engine will continue to run below capacity Opinions expressed by Entrepreneur contributors are their own. You're reading Entrepreneur India, an international franchise of Entrepreneur Media. India's micro, small and medium enterprises (MSMEs) are seeing an unprecedented surge in formal credit, yet the gap between potential and reality remains stark. The total outstanding portfolio in the MSME credit sector soared to INR 40.4 lakh crore by the end of March 2025, a 20.1 per cent jump from INR 33.6 lakh crore in March 2024 and a significant leap from INR 28.3 lakh crore in March 2023. But experts warn; the surge, while promising, isn't enough. Micro and small enterprises continue to anchor this sector. According to a report by CRIF High Mark, businesses with small-exposure accounted for 40 per cent of total outstanding credit as of March 2025, while micro-exposure businesses, those seeking smaller loan sizes, made up a dominant 81.1 per cent of loan volumes. Credit exposure for micro businesses grew 19.7 per cent year-on-year, and a staggering 45.3 per cent since March 2023. These gains are closely tied to the Udyam Assist Platform, which formalizes micro-enterprises and connects them to government schemes and collateral-free lending. As of June 2025, Udyam and Udyam Assist had registered nearly 6.5 crore enterprises, with 6.4 crore falling under the micro category. Yet this momentum masks deeper structural issues. "Credit plays an important role in the development and scaling of MSMEs by enabling them to invest in machinery, inventory, staff, and other expansions," said Mayur Modi, co-founder, co-CEO & COO of Moneyboxx Finance. "For many small businesses, especially in Tier II, Tier III cities and rural areas, access to timely and affordable credit is often the difference between stagnation and growth." Still, Modi doesn't see the current lending environment as adequate. "Traditional lending models often rely on collateral and formal documentation, which many of these businesses lack. Although NBFCs, fintechs, and co-lending models have improved outreach, challenges like limited risk appetite, high interest rates, and uneven digital penetration still hinder true financial inclusion," he said. The number of active MSME loans climbed to 211.8 lakh as of March 2024, a 23.7 per cent year-on-year rise. By March 2025, that growth had tapered, with just a 1.3 per cent increase, an early sign that institutional credit may be approaching a ceiling under the current lending architecture. Irem Sayeed, chief credit officer at UGRO Capital, sees this gap in stark numbers. "Despite the critical role MSMEs play, 75 per cent of them still rely on informal sources of credit. That reflects a 48 per cent credit gap in formal financing," she said. "Access to timely, affordable credit is often the only way these businesses can survive and scale—whether it's to fulfil larger orders, hire talent, or invest in operations." Public sector banks remain the primary source of credit for micro businesses, with a 45.7 per cent market share as of March 2025. Meanwhile, private banks dominate lending to Small and Medium Exposure businesses, commanding nearly 50 per cent of that segment. Non-banking financial companies (NBFCs), aided by the inclusion of bank credit to NBFCs for on-lending under the priority sector lending framework, have also expanded their footprint. However, the expansion of formal credit remains uneven. "The current lending ecosystem remains inadequate," Sayeed said. "While government schemes—like the INR 22,000 crore allocation to the Ministry of MSME, the enhancement of Mudra Tarun loans to INR 20 lakh, and credit guarantees under the RAMP and MSME Champions programs—have helped, they're not sufficient to fully bridge the gap." She called for a stronger push from the private sector to support underserved markets: "Inclusive, flexible, and tech-enabled lending models are critical to bringing these businesses into the formal fold and unlocking their true economic potential." While progress is evident in the rising portfolio and loan volumes, the formal system still misses a majority of MSMEs. Until lending models evolve to meet the real-world needs of these businesses, especially those outside metro hubs, India's small business engine will continue to run below capacity.
Time of India
4 days ago
- Business
- Time of India
Loans to MSMEs increase to over Rs 40 lakh crore on back of policy push
Live Events (You can now subscribe to our (You can now subscribe to our Economic Times WhatsApp channel KOLKATA: India's micro, small and medium credit market expanded by a quarter to Rs 40.4 lakh crore as of March, buoyed by the combined impact of policy support, digitalisation, and a sustained push for financial inclusion , credit bureau CRIF High Mark said. Public sector banks continued to lead in micro business lending with 45% market share while private banks dominated the small and medium business segments, the credit bureau said on Thursday, unveiling a MSMEx (micro, small and medium exposure) Spotlight report captures critical shifts in credit exposure, lender trends, borrower behaviour, and sectoral distribution, highlighting the ecosystem evolving towards greater formalization and lenders have steadily increased their footprint across segments, benefiting from regulatory support that classifies on-lending to small enterprises under priority sector norms. Micro & small exposure businesses lead the sector-small exposure businesses hold 40% of outstanding credit value, while micro exposure businesses dominate in active loans volume (81.1%).Proprietorships remain dominant (62.8%) for micro exposure businesses with working capital loans accounting for over 50% of the outstanding loans.
Mint
18-06-2025
- Business
- Mint
Credit score: 5 common errors in credit report and how to correct them
As a credit user, it is incumbent upon you to check your credit report from time to time. And if there are mistakes, it is profoundly important to correct them. For instance, there could be a mistake with regards to the payment history or the details regarding your loan. Even personal information could also be wrong in your credit report. If there is any such mistake, the credit user must get it rectified in his credit report. Here we list out five common mistakes in the credit report and how they can be corrected. I. Personal information errors: It could relate to wrong name, date of birth, incorrect PAN or address or wrong contact details. To correct this, you need to submit a correction request to the credit bureau such as CRIF High Mark. You will need to provide ID proof such as PAN card and Aadhaar. You can update the information through your bank or lender if they report it incorrectly. II. Account or loan details errors: There could be some loan or credit card which you never applied for. There could also be duplicate accounts or incorrect account status which shows active instead of closed. In such a scenario, one can dispute the error with the bureau by raising a dispute request and submit documents such as account closure letters or no-dues certificates. You can also contact the financial institution that reported the incorrect data. III. Payment history mistakes: There could be on-time payments which are marked as late, or incorrect number of days past due. Additionally, there could be EMI bounce which was reported wrongly. This can be corrected by collecting your bank/payment proof (such as bank statement or confirmation email). You can raise a dispute with the credit bureau and follow up with your bank to send corrected data to the bureau. IV. Incorrect credit limit or loan amount: There could be wrong credit limit reported on credit cards. There could also be incorrect loan disbursement or balance amount or overstated utilisation ratio due to limit errors. To correct it, you could get a written confirmation from your lender of the correct credit limit or amount. Then you could send it to the credit bureau with your dispute request. V. Outdated information: There could be settled or closed accounts which are still shown as open. Else, the old addresses or employment data is not updated. Additionally, there could be loans already paid off but still showing outstanding balance. To correct this, you can submit updated documentation (such as settlement letters and loan closure documents). You can request the lender to report the updated information to the credit bureau. You can also raise a dispute directly with the credit bureau online. Disclaimer: Mint has a tie-up with fintechs for providing credit, you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit score. Mint does not promote or encourage taking credit as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit. For all personal finance updates, click here.
Mint
12-06-2025
- Business
- Mint
What is a soft inquiry and why it doesn't hurt your credit score
You must have heard it several times that one should check one's credit score on a regular basis. It helps you rectify any mistake which could be there on your credit report apart from keeping you stay updated of your creditworthiness. This helps you negotiate with lenders effectively at the time of borrowing a loan. What happens when you check your credit score? It leads to a soft inquiry. Those who are not aware -- a soft inquiry is a type of credit check that takes place when you check your credit score or when a lender checks your credit for a pre-approved loan offer. This also takes place when current lenders review your account periodically. There is a misconception that soft inquiry leads to the loss of credit score. I. Against the perception, soft inquiry does not affect your credit score. II. It is not visible to lenders when they check your credit report. III. This can occur even without your explicit request (for instance in case of promotional offers). I. When you check your own credit score on apps such as CRIF High Mark II. When credit card companies happen to send you pre-approved offers III. Although it is yet not common in India, but employers could also carry out a basic check without a full application. This is quite different from hard inquiry which happens when a bank checks your credit as part of a loan or credit card application. As a matter of fact, hard inquiries can bring your credit score down slightly (usually by a few points) and are likely to remain on your credit report. Disclaimer: Mint has a tie-up with fin-techs for providing credit, you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit score. Mint does not promote or encourage taking credit as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit. For all personal finance updates, click here
Economic Times
11-06-2025
- Business
- Economic Times
Microfinance sector sees equity, borrowing and loan book shrink in FY25
Microfinance companies faced sharp declines in equity, borrowing, and loan portfolios in FY25, reflecting stress and cautious lending in the NBFC-MFI segment. NBFC-MFIs saw their equity shrink 1.8% and debt funding drop 36% in FY25 amid tightened lending by banks and investors. Loan portfolios also contracted nearly 14% as lenders slowed disbursements due to asset quality concerns. Tired of too many ads? Remove Ads Tired of too many ads? Remove Ads The equity capital of pure-bred microfinance companies shrank 1.8% in 2024-25 while their outstanding annual borrowing saw a 36% drop as investors and banks tightened purse strings amid the stress in the microfinance companies are classified as non-banking finance company-microfinance institutions (NBFC-MFI).Total equity decreased 1.8% to Rs 35,759 crore at the end of March, the Microfinance Institutions Network (MFIN) said in its March quarter report. During 2024-25, NBFC-MFIs received a total of Rs 57,307 crore in debt funding, a 35.7% decrease from the previous financial is one of the two self-regulators for the to the data, banks contributed 78.4% of NBFC-MFIs' total annual borrowing in 2024-25. Other NBFCs contributed 11.9%, followed by external commercial borrowing (5.1%) and other sources (4.6%).The size of the gross microfinance loan portfolio contracted about 13.9% year-on-year to Rs 3.81 lakh crore at the end of 2024-25, according to CRIF High Mark data . The cumulative gross loan size for MFIN members declined 13.5% to Rs 3.75 lakh crore, as lenders slowed disbursement amid severe asset quality stress Among the regulated entities active in the microfinance segment, portfolio size of all entity types fell except for NBFCs, which saw a 4.1% year-on-year increase, said the MFIN report In terms of geographical coverage, east, northeast and south comprised 62.7% of the total microfinance portfolio. Portfolio quality as measured by PAR 31-180 – which indicates the percentage of a loan portfolio considered at risk of default within 31 to 180 days of delinquency – was 6.3% against 2.2% at the end of FY25.
