MSMEs Boosted by Digital Lending and Policy Initiatives as Bank Credit Surges

The Economic Survey 2026 reveals a robust increase in bank credit to MSMEs, driven by policy measures such as digital lending, expanded guarantees, and prioritization norms. Credit to micro and small enterprises rose 24.6% YoY in November 2025, bolstered by initiatives like credit cards and new classification guidelines.

In a significant economic development, the Economic Survey 2026 has reported a strong escalation in bank credit extended to Micro, Small, and Medium Enterprises (MSMEs). This surge is attributed to strategic policy initiatives including enhanced guarantees, the introduction of digital lending platforms, and priority-sector norms.

The year-on-year growth trend in credit, particularly for industry and services, has seen a moderate elevation so far in FY26. Notably, bank credit to the MSME sector has maintained a robust momentum. In November 2025, credit to this sector climbed by an impressive 21.8% compared to the previous year's 13% increase.

Within the MSME domain, credit extended to micro and small enterprises notably surged by 24.6% YoY, as opposed to a 10.2% rise observed in November 2024. The survey highlights that revised guidelines on the voluntary pledge of gold and silver jewellery for collateral purposes have significantly improved credit flows to the MSME sector.

Further strengthening this trend, the Union Budget 2025-26 unveiled measures to boost credit availability, including new credit card initiatives for micro-enterprises and a revised MSME classification with increased investment and turnover limits. The launch of a digital credit assessment model (CAM) by public sector banks in 2025 has fostered automated loan appraisals based on digital footprints, aiding both existing and new MSME borrowers.

From April to November 2025, public sector banks sanctioned over Rs 41.5 thousand crore worth of MSME loans. These efforts are complemented by expanded credit guarantees, increased use of TReDS, and the rollout of the Unified Lending Interface, aiming to alleviate credit constraints for MSMEs.

(With inputs from agencies.)