CRIF–SIDBI Small Business Spotlight 2025: Resilient Growth Amid Formalisation

India’s small business credit ecosystem demonstrates resilience and steady expansion, according to the second edition of the CRIF–SIDBI Small Business Spotlight Report (December 2025, based on September 2025 data). Covering enterprises and sole proprietors with formal credit exposure up to ₹5 crore, largely overlapping with micro and small MSMEs, the report reveals a portfolio reaching ₹46 lakh crore, up 16.2% year-on-year, with active loan accounts at 7.3 crore, rising 11.8% YoY.

This growth, moderating from 19.3% YoY earlier, reflects cautious underwriting amid robust macro support: 8.2% GDP growth in Q2 FY26, festive demand, GST rationalisation, and MSME schemes like PMMY, CGTMSE, and RAMP. Asset quality strengthened, with PAR 91-180 days delinquency falling to 1.4% from 1.7% in September 2023, driven by digital underwriting and proactive monitoring.

Sole Proprietors Drive Formalisation

Sole proprietors anchor the ecosystem, comprising 80% of credit and 90% of borrowers. The fastest-growing segment, sole proprietors with entity presence, expanded 20.1% YoY, led by loans against property (LAP) at 29.2% YoY. Formalisation indicators are strong: 23.3% of borrowers were new to business credit, 12% were new to enterprise borrowing, and 11.7% of sole proprietors migrated to entity loans in the past year.

Lender and Product Shifts

Private banks lead enterprise lending, followed by PSBs (share down to 37.8% from 39.3%). NBFCs surged among sole proprietors, capturing a 41.8% share, up 10 points, via small-ticket loans. Working capital dominates enterprises at 56.7%, while LAP leads for sole proprietors, followed by business and commercial vehicle loans. Unsecured business loans grew 31% YoY despite stress concerns.

Regional and Sectoral Momentum

Maharashtra (₹6.05 lakh crore), Tamil Nadu, Uttar Pradesh, and Gujarat top portfolio sizes, but Telangana (23.4% YoY), Andhra Pradesh (16.8%), and West Bengal show superior growth—key for MSME export hubs. Beyond the top 100 locations, the share for sole proprietors rose to 39.2%, led by UP, MP, Karnataka, and TN. Manufacturing holds an absolute lead (₹3.1 lakh crore, 9.7% YoY), and services accelerated at 19.6% YoY.

Odisha Spotlight: Eastern Growth Engine

Odisha’s portfolio hit ₹0.96 lakh crore (17.2% YoY, above the national 16.2%), with 23.3 lakh active loans, up 13.8%. PSBs dominate at 42.8%, and NBFCs grew to 23% in under-penetrated areas. Aspirational districts expanded 22.4% YoY to 13.7% state share, outperforming national averages with lower delinquency. Khordha (14.1% share), Cuttack, and Ganjam lead, fueled by agro, textiles, and emerging clusters like Paradeep plastics. Policies such as the MSME Development 2022 and CM-SRIM bolster this trajectory.

Enterprises show the lowest risk; sole proprietors improved (PAR 91-180: 2.1% to 1.7%). The very low- to low-risk share rose to 66.9% (enterprises) and 54.4% (sole proprietors). However, NBFC PAR ticked up to 1.4%, and younger borrowers (under 35) face higher delinquency.