MSME Sector Sees 11% Boost in Loan Demand Amid Mixed Credit Supply

The MSME sector in India experienced an 11% increase in loan demand from January to March 2025, according to a SIDBI and TransUnion CIBIL report. Private banks accounted for 42% of this demand, rising 8%, while public sector banks saw a 15% increase. Challenges persist due to a mixed credit supply landscape.

The latest report by the Small Industries Development Bank of India (SIDBI) and TransUnion CIBIL reveals an 11% growth in commercial loan demand within the Micro, Small and Medium Enterprises (MSME) sector during the first quarter of 2025. This growth highlights the sector's continued reliance on credit facilities.

Private sector banks, leading with 42% of the demand, saw an 8% increase in loan applications, while public sector banks experienced a more robust 15% rise during the same period. Despite these promising figures, the overall credit supply reported mixed results, with only a 3% year-on-year increase in value for FY 2024-25.

Economic uncertainties have contributed to an 11% quarterly decline in credit supply from January to March 2025, yet segments like new cash credit facilities showed resilience with 7% growth. The MSME sector remains under-leveraged, with only 3.68 crore of the registered 6.35 crore MSMEs having accessed credit, presenting a vast opportunity for lenders to tap into the New-to-Credit (NTC) demographic.

(With inputs from agencies.)