MSME loan growth in India has started to slow down amid growing geopolitical instability, but the sector is still robust, with portfolio outstanding reaching almost Rs 46 lakh crore in April 2026, according to a survey by CRIF High Mark. Strong domestic demand, policy changes, and rising asset quality all contributed to the 12.8 per cent year-over-year (YoY) increase in portfolio outstanding. However, in recent months, the rate of growth has slowed. Portfolio growth slowed to 3.1 per cent between December 2025 and April 2026 from 9.7 percent during the same period the previous year, while active loans decreased 3.5 per cent from a 3 per cent increase in the same period the previous year, as per the survey. These patterns may indicate the early effects of global uncertainty on MSME finance. The survey highlighted that over 60 per cent of the MSME portfolio is made up of manufacturing and trade, both of which had lower credit momentum during that time. Before declining to 3.1 per cent in April, manufacturing credit growth dropped to 4.3 per cent between December 2025 and March 2026 from 10.4 per cent the year before. Meanwhile, the reported portfolio reductions in manufacturing, shipping and transportation, food processing, automobiles, and related industries range from 14 per cent to 17 per cent. Additionally, the sector’s early-stage delinquencies rose from 1.6 per cent in March to 1.8 per cent in April. Micro enterprises continue to be the most susceptible borrower category, according to the survey. Despite making up almost 86 percent of all current loans, they had the highest early-stage default rate of 2.7 per cent, compared to 1.5 per cent for small firms and 0.8 per cent for medium-sized organizations. Furthermore, between December 2025 and March 2026, active loans decreased by 4.6 per cent, while micro portfolio outstanding decreased by 3.1 per cent. Also, there was some stabilization in April, but the sector still needs to be closely watched.
