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What is the story about?
India’s small business credit ecosystem continued to expand at a steady pace through 2025, with total exposure reaching ₹47.8 lakh crore as of December, marking a 14.9% year-on-year increase, according to the latest CRIF High Mark–SIDBI Small Business Spotlight Report.
The data, which tracks businesses with aggregate exposure of up to ₹5 crore, points to sustained momentum in lending activity despite global uncertainties, supported by domestic macroeconomic stability and policy-led support.
Sole proprietors dominate portfolio, borrower base
Sole proprietors remained central to the ecosystem, accounting for nearly 80% of total portfolio outstanding. Pure sole proprietors alone contributed 62.5% of active loans and 73% of total borrowers, underscoring their role as the primary driver of both credit growth and borrower addition.
Originations grow 13.3%, led by younger and women borrowers
Loan originations rose 13.3% year-on-year between December 2024 and December 2025. Within this, originations to sole proprietors grew faster at 15%.
Participation trends show a gradual diversification of the borrower base. Women accounted for 23.9% of originations in the segment, while borrowers below 35 years continued to drive incremental demand. The average ticket size for sole proprietors remained largely stable at ₹3.34 lakh.
NBFCs expand footprint to 28% market share
Non-banking financial companies (NBFCs) increased their share in the overall small business loan portfolio to 28% as of December 2025, up from 26.8% a year earlier.
Their presence is more pronounced in the sole proprietor segment, where they accounted for 41.6% of the outstanding portfolio (excluding borrowers operating via enterprises), indicating a strong role in catering to smaller-ticket and collateral-backed loans.
Asset quality holds steady amid growth
Despite the expansion in credit, asset quality indicators remained stable. Loans overdue by 31–90 days (PAR) stood at 3.5%, while those overdue by 91–180 days were at 1.3%. Both metrics remained largely unchanged between September and December 2025, suggesting controlled risk levels.
Credit deepens beyond metros; smaller cities gain share
Geographically, the top 10 states accounted for about 72% of total portfolio outstanding. Uttar Pradesh, Telangana and West Bengal contributed the most to incremental growth.
At the same time, lending activity continued to deepen outside large urban centres. Smaller cities (BT100) now account for nearly 40% of sole proprietor credit, reflecting expanding credit access in semi-urban and rural areas.
New-to-credit borrowers rise; risk profiles improve
Formalisation trends gathered pace, with new-to-credit (NTC) borrowers accounting for 23.3% of sole proprietor originations and 11% of enterprise originations over the past year.
Alongside, borrower risk profiles improved. The share of very low- and low-risk borrowers increased from 64.8% to 69.1% for enterprises, and from 50.3% to 55.8% for sole proprietors between December 2023 and December 2025.
Gujarat sees 11.8% growth with better asset quality
At a state level, Gujarat’s small business portfolio grew from ₹3.5 lakh crore to ₹3.9 lakh crore over the past year, reflecting 11.8% growth.
Active loans rose 9.8% to 42.4 lakh, while asset quality outperformed the national average. PAR for 91–180 days improved to 0.9%, compared with the national level of 1.3%. Enterprise-led originations in the state also grew 16.7% year-on-year as of the third quarter of FY26.
Aspirational districts see faster credit expansion
Credit growth in aspirational districts outpaced the broader market, rising 18.4% year-on-year from ₹2.7 lakh crore to ₹3.2 lakh crore. Active loans in these regions increased to 72.2 lakh.
Asset quality also improved in these districts, with PAR 91–180 days declining from 1.8% to 1.4%, narrowing the gap with national benchmarks.
The data, which tracks businesses with aggregate exposure of up to ₹5 crore, points to sustained momentum in lending activity despite global uncertainties, supported by domestic macroeconomic stability and policy-led support.
Sole proprietors dominate portfolio, borrower base
Sole proprietors remained central to the ecosystem, accounting for nearly 80% of total portfolio outstanding. Pure sole proprietors alone contributed 62.5% of active loans and 73% of total borrowers, underscoring their role as the primary driver of both credit growth and borrower addition.
Originations grow 13.3%, led by younger and women borrowers
Loan originations rose 13.3% year-on-year between December 2024 and December 2025. Within this, originations to sole proprietors grew faster at 15%.
Participation trends show a gradual diversification of the borrower base. Women accounted for 23.9% of originations in the segment, while borrowers below 35 years continued to drive incremental demand. The average ticket size for sole proprietors remained largely stable at ₹3.34 lakh.
NBFCs expand footprint to 28% market share
Non-banking financial companies (NBFCs) increased their share in the overall small business loan portfolio to 28% as of December 2025, up from 26.8% a year earlier.
Their presence is more pronounced in the sole proprietor segment, where they accounted for 41.6% of the outstanding portfolio (excluding borrowers operating via enterprises), indicating a strong role in catering to smaller-ticket and collateral-backed loans.
Asset quality holds steady amid growth
Despite the expansion in credit, asset quality indicators remained stable. Loans overdue by 31–90 days (PAR) stood at 3.5%, while those overdue by 91–180 days were at 1.3%. Both metrics remained largely unchanged between September and December 2025, suggesting controlled risk levels.
Credit deepens beyond metros; smaller cities gain share
Geographically, the top 10 states accounted for about 72% of total portfolio outstanding. Uttar Pradesh, Telangana and West Bengal contributed the most to incremental growth.
At the same time, lending activity continued to deepen outside large urban centres. Smaller cities (BT100) now account for nearly 40% of sole proprietor credit, reflecting expanding credit access in semi-urban and rural areas.
New-to-credit borrowers rise; risk profiles improve
Formalisation trends gathered pace, with new-to-credit (NTC) borrowers accounting for 23.3% of sole proprietor originations and 11% of enterprise originations over the past year.
Alongside, borrower risk profiles improved. The share of very low- and low-risk borrowers increased from 64.8% to 69.1% for enterprises, and from 50.3% to 55.8% for sole proprietors between December 2023 and December 2025.
Gujarat sees 11.8% growth with better asset quality
At a state level, Gujarat’s small business portfolio grew from ₹3.5 lakh crore to ₹3.9 lakh crore over the past year, reflecting 11.8% growth.
Active loans rose 9.8% to 42.4 lakh, while asset quality outperformed the national average. PAR for 91–180 days improved to 0.9%, compared with the national level of 1.3%. Enterprise-led originations in the state also grew 16.7% year-on-year as of the third quarter of FY26.
Aspirational districts see faster credit expansion
Credit growth in aspirational districts outpaced the broader market, rising 18.4% year-on-year from ₹2.7 lakh crore to ₹3.2 lakh crore. Active loans in these regions increased to 72.2 lakh.
Asset quality also improved in these districts, with PAR 91–180 days declining from 1.8% to 1.4%, narrowing the gap with national benchmarks.
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