New Delhi [India]: Commercial loan demand in the Micro, Small and Medium Enterprises (MSME) sector witnessed an 11 per cent year-on-year (YoY) growth in the January to March 2025 quarter, according to a report jointly released by the Small Industries Development Bank of India (SIDBI) and TransUnion CIBIL.
The report highlighted that private sector banks, which accounted for 42 per cent of the MSME credit demand, experienced an 8 per cent growth in demand during this period.
It said, "Commercial loan demand grew by 11 per cent in the Jan-Mar '25 quarter compared to the same period the previous year."
On the other hand, public sector banks, holding a 39 per cent share in MSME credit demand, saw a more robust 15 per cent YoY growth.
However, despite the rise in credit demand, the supply side presented a mixed picture. While overall commercial credit supply by value increased by 3 per cent YoY for FY 2024-25, the latest quarter (Jan-Mar '25) recorded an 11 per cent decline compared to the same period last year.
The report attributed this sharp quarterly drop to heightened credit concerns among lenders, possibly triggered by rising external economic headwinds.
Nonetheless, certain segments of credit origination remained resilient. Notably, credit extended through new cash credit facilities grew 7 per cent YoY during the Jan-Mar '25 quarter, signalling continued traction in working capital financing.
Private banks, which otherwise hold a significant share of MSME lending, witnessed the sharpest decline in YoY growth at -14 per cent. This was primarily due to reduced demand from borrowers with exposures between Rs 10 crore and Rs 50 crore.
The drop was most pronounced in Medium to Long-term loans with tenures exceeding one year, as well as in overdraft facilities.
According to the Ministry of MSME, there were 6.35 crore Udyam-registered MSMEs, including those on the Udyam Assist Portal, as of May 12, 2025. However, only 3.68 crore MSMEs have accessed credit at least once, highlighting a significant untapped potential.
The report noted that this presents a promising opportunity for lenders to target the New-to-Credit (NTC) segment and further expand the MSME credit portfolio.
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