MSME Share In Incremental Bank Lending Nearly Doubles To 32.5%: Crisil

(MENAFN- KNN India) New Delhi, Jan 9 (KNN) Loans to MSMEs accounted for a significantly higher share of incremental bank credit during January–October 2025, supported largely by lending from public sector banks (PSBs), according to a latest report by Crisil Intelligence.

MSME Share in Incremental Credit Nearly Doubles

Crisil said the share of incremental credit flowing to MSMEs rose sharply to 32.5 percent during the period, compared with 17.7 percent in the corresponding period last year. The proportion of MSME loans in overall outstanding bank credit also increased by 1.74 percent.

However, in line with observations made in the Reserve Bank of India's Financial Stability Report, Crisil flagged early signs of stress in small-ticket, unsecured MSME loans. It noted that public sector banks continue to carry meaningful exposure to subprime MSME borrowers.

Exposure to US Tariffs Remains a Risk

The report highlighted that around 12.6 percent of bank credit remains exposed to US tariffs, with the textiles sector alone accounting for more than 43 percent of this exposure.

The share of secured retail loans in incremental credit increased to 31.3 percent, up from 24.5 percent in the year-ago period. The share of unsecured retail personal loans declined to 9.7 percent in October 2025 from 11 percent a year earlier, in line with regulatory guidance.

On a year-on-year basis, growth in unsecured retail loans moderated to 9.8 percent in October 2025, down from 11.7 percent in October 2024.

Rural and Semi-Urban Credit Picks Up

The report also pointed to a recovery in rural demand, with the combined share of incremental credit in rural and semi-urban areas rising to 26.3 percent as of September 2025 from 23.7 percent a year earlier.

Meanwhile, the share of metropolitan regions declined to 51.6 percent from 56.2 percent over the same period. Crisil noted that sluggish private sector capital expenditure led to a contraction in high-ticket industrial loans during the period.

(KNN Bureau)

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