By Puja Sharma

CRIF High Mark and SIDBI have recently unveiled the second edition of the CRIF–SIDBI Small Business Spotlight Report for December 2025. This insightful report delves into the financial ecosystem surrounding small businesses that have credit exposure of up to ₹5 crore (approximately $600,000). These small enterprises not only play a crucial role in financial inclusion but also significantly contribute to job creation and balanced economic growth across various regions in India.

The findings depict a resilient and steadily strengthening environment for small business credit. As credit portfolios expand, the formalization of these businesses is progressing gradually. An increasing number of lenders are actively participating in this space, contributing to maintaining healthy asset quality.

Aggregate small business credit exposure has soared to an impressive ₹46 lakh crore, marking a remarkable year-on-year growth of 16.2%. Active loan accounts have surged by 11.8%, reaching a total of 7.3 crore. This sustained growth can be attributed to robust policy support and various government credit schemes tailored for Micro, Small, and Medium Enterprises (MSMEs).

Sole proprietorships remain the dominant force in the credit ecosystem, accounting for approximately 80% of total credit along with nearly 90% of borrowers. Notably, the thriving segment of sole proprietors with a formal entity is experiencing the fastest growth, expanding by an impressive 20% year-on-year, predominantly fueled by loans secured against property assets. By September 2025, it was reported that 23.3% of borrowers were new to credit, while 12% were engaging in enterprise borrowing for the first time, indicating a clear trend toward increasing formalization within this sector.

In the realm of enterprise lending, private banks continued to lead, closely trailed by public sector banks. Non-Banking Financial Companies (NBFCs) have also been steadily increasing their presence, particularly among sole proprietors, where they now account for over 41% of lending in this segment.

For enterprises, working capital loans have taken center stage, representing nearly 57% of the outstanding credit. Term loans are essential for facilitating capital expenditure. Among sole proprietors, the largest category of debt continues to come from loans against property, followed by business loans and commercial vehicle loans. Unsecured lending has witnessed phenomenal growth, soaring by 31% year-on-year, while concerns about stress persist in the market.

The states of Maharashtra, Tamil Nadu, Uttar Pradesh, and Gujarat continue to lead in terms of overall portfolio size in small business credit. Meanwhile, states like Telangana, Andhra Pradesh, and West Bengal show strong momentum in credit growth. Credit penetration is increasingly extending beyond the top 100 urban locations, particularly in Uttar Pradesh, Madhya Pradesh, Karnataka, and Tamil Nadu. While manufacturing holds the lead in absolute credit exposure, the services sector has recorded an impressive year-on-year growth rate of 19.6%.

Quality within the portfolio has notably improved across various segments. Loans that were overdue by 91 to 180 days have declined to around 1.4% as of September 2025, down from 1.7% recorded in September 2023. Enterprises continue to exhibit lower risk profiles, and sole proprietors are also showing steady improvement in their risk assessments. Over this period, the share of very low and low-risk borrowers markedly increased thanks to enhanced underwriting practices and a greater reliance on digital data in decision-making.

An interesting highlight from the report is the focused observation of Odisha as a state demonstrating promising growth. Small business credit in Odisha experienced growth, increasing from ₹0.67 lakh crore in September 2023 to ₹0.96 lakh crore in September 2025. This marks a striking year-on-year growth rate of 17.2%, exceeding the national average. Credit growth in aspirational districts has even surpassed 22%, along with improved delinquency trends. Public sector banks hold more than a 40% share in the Odisha market, while NBFCs are rapidly expanding into under-penetrated regions. Importantly, the risk profile has improved significantly; the share of very low-risk small enterprises increased from 40.1% in September 2023 to 47.1% in September 2025, opening up further lending opportunities for financial institutions.

Sachin Seth, Chairman, CRIF High Mark and Regional Managing Director – CRIF India and South Asia stated, “Sole proprietors continue to anchor India’s small business credit ecosystem, accounting for close to 80% of the borrower base as of September 2025. At the same time, borrowers with both individual and enterprise credit presence are contributing a steadily rising share of overall credit exposure, and this segment has recorded the strongest growth in exposure over the year. Together, these trends indicate that credit deepening and gradual formalization are progressing simultaneously as small businesses scale.”

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