Total bank credit to industries grew 10.1 per cent in the first ten months of FY26, up from the 6.3 per cent growth seen in the corresponding period of FY25.

Micro and small industries (MSE), which have 23.5 per cent share in outstanding bank credit to industry, recorded 29.2 per cent growth between April 2025 to January 2026. This is sharply higher than the 7.2 per cent growth recorded in the same period in FY25. Outstanding credit to this segment rose from ₹7.98 lakh crore towards the end of March 2025 to ₹10.31 lakh crore by the end of January 2026.

Several policy measures seem to have helped the growth in MSE credit. It was announced in the 2025 Budget that the coverage will be increased from ₹5 crore to ₹10 crore under Credit Guarantee Scheme – I, to all guarantees approved on or after April 01, 2025, including enhancement in working capital.

In FY 2024–25, Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) approved a record ₹3.06 lakh crore in credit guarantees. However, VN Shiva Shankar, Senior Vice-President of Southern India Chamber of Commerce and Industry (SICCI) says that although, “CGTMSE limit increase was impactful, the increase in the ceiling for MUDRA scheme from ₹10 lakhs to ₹20 lakhs, was more impactful.”

Formalisation helps

Some experts think that increasing formalisation is also helping the growth of MSE loans. “Micro and small enterprises are leading the recent growth in industrial credit primarily because they are expanding from a smaller base and benefiting from rapid formalisation,” Shachindra Nath, MD of UGRO Capital.

“In this aspect ‘UDYAM’ registrations have been extremely helpful. MSMEs have now seen that some of the larger players are even going for listing, incentivising higher formalisation,” says Shankar.

Mr. Siva Shankar further stated that, “the banks have also been searching for good MSMEs to lend. However, the ability to do a credit risk assessment or the conviction that they can lend and they can collect was missing. Trade Receivables Discounting System (TreDS) platform is a game changer in this regard as it frees MSMEs from the working capital requirements, easing security fears of banks.”

Sarvadnya Kulkarni, CEO of General Instruments Consortium, a MSME, says, “the increase in MSME credit is closely aligned with the revival in industrial capex. Sectors such as oil & gas, power, chemicals and infrastructure have seen stronger project execution, and MSMEs operating within these are drawing higher working capital. Export growth has also contributed significantly as engineering MSMEs are expanding deliveries, which requires enhanced inventory funding.”

Medium industries also recorded robust credit growth at 17.3 per cent in the first ten months. Outstanding credit to this segment stood at ₹4.26 lakh crore towards the end of January 2026, accounting for 9.7 per cent share. Credit growth to large industries, however, declined to 3.8 per cent, lower than last year’s 5.2 per cent growth in the first ten months of FY26. But large industries still account for more than two-third share of all outstanding bank credit to industries.

Published on February 27, 2026