New Delhi, March 19 Credit demand from micro, small, and medium enterprises (MSMEs) is expected to remain strong, driving India’s projected credit growth of around Rs 26 trillion in FY26, up around 14.3 per cent YoY, a report said on Thursday.
Credit growth is projected to moderate 11.3-12 per cent or Rs 23.5 to Rs 25 trillion of incremental growth, in FY27, the joint report by ICRA Limited and ASSOCHAM said.
The moderation is viewed as a normalisation following a high base in the previous year rather than a weakening of demand.
A large structural gap in access to finance continues to constrain the MSME sector, the report said, adding that overall bank credit expansion is projected to remain flat, with MSMEs and retail driving incremental growth.
ASSOCHAM Secretary General Saurabh Sanyal said strengthening access to finance for MSMEs remains critical to sustaining inclusive growth and ensuring that the benefits of economic expansion are widely distributed across regions and sectors.
ICRA Ltd Executive Director K. Ravichandran noted that while the financial system is structurally stronger and more resilient than in the past, evolving credit dynamics require a shift beyond traditional lending approaches.
Credit demand is expected to remain “buoyant”, supported by improving economic activity, better balance sheets across sectors and continued formalisation, the report noted.
MSMEs emerged as key drivers as supply chains deepen and smaller enterprises become more integrated into formal production systems, contributing to economic expansion across urban and semi-urban markets.
The report also pointed out that "formalisation initiatives, enhanced classification thresholds and policy support have improved credit visibility," enabling lenders to better assess borrower profiles and expand credit access.
The report noted that the formalisation supported a gradual increase in the share of MSMEs in incremental bank lending, with improved transparency and data availability aiding credit underwriting and risk assessment.
“A large structural credit gap persists due to heterogeneous risk profiles, limited collateral and information opacity,” the report noted, adding that they restrict the timely and adequate flow of credit, particularly for smaller enterprises and those operating outside fully formalised frameworks.
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