India`s Small Business Credit Ecosystem Sustains Growth with Stable Asset Quality; Tamil Nadu Emerges as a Mature and Resilient Market
India’s small business credit ecosystem continued to expand steadily through March 2026, supported by a conducive macroeconomic and policy environment, according to the fourth edition of the CRIF–SIDBI Small Business Spotlight Report (March 2026) released by CRIF High Mark. Covering businesses with aggregate credit exposure of up to Rs 5 crore, including sole proprietors and commercial enterprises, the report highlights sustained credit growth, improving asset quality and increasing momentum beyond major urban centres.
As of March 2026, the total small business portfolio outstanding stood at Rs 49.2 lakh crore, growing 13.4% year-on-year and nearly 3% quarter-on-quarter, while active loans reached 7.5 crore. Sole proprietors continued to drive growth, accounting for nearly 80% of the portfolio and over 87% of active loans, including those with entity presence.
Loan Against Property (LAP) remained the largest product category, accounting for 27.1% of the consolidated portfolio outstanding, followed by business loans (24.8%) and working capital products (22.8%). LAP’s share increased from 25.5% in March 2025 to 27.1% in March 2026, underscoring the continued importance of secured credit in the MSME sector.
The top ten states accounted for 72% of the overall portfolio outstanding. Growth was led by Andhra Pradesh, which recorded year-on-year growth of 16.5% and quarter-on-quarter growth of 5.6%, and Uttar Pradesh, which posted year-on-year growth of 18.5% and quarter-on-quarter growth of 4.5%. Meanwhile, locations beyond the top 100 cities outperformed with a CAGR of 21.6% between March 2023 and March 2026.
Asset quality improved during the year, with PAR 90+ declining to 4.0% in March 2026 from 4.2% a year earlier (March 2025), supported by improvements across both the PAR 91–180 and PAR 180+ buckets.
Tamil Nadu: A Mature and Resilient Credit Market
Tamil Nadu accounted for around 10% of India’s small business portfolio outstanding and 9% of active loans as of March 2026. The state’s portfolio outstanding stood at ?4.6 lakh crore, up 11.6% year-on-year, while active loans reached 66.7 lakh, growing 0.5% year-on-year, indicating a shift towards higher-ticket-size lending.
While Chennai and Coimbatore together accounted for 19% of the state’s portfolio outstanding, growth is increasingly broad-based. Krishnagiri and Kancheepuram recorded year-on-year growth of 14.9% and 14.6%, respectively, while the rest of the state grew 13.7%.
Credit quality improved, with PAR 91–180 easing to 1.4% in March 2026 from 1.5% a year earlier, although the Chennai cluster credit portfolio remains on watch with respect to certain manufacturing industries.
NBFCs remained the largest lender group in Tamil Nadu, accounting for 37% of portfolio outstanding as of March 2026, compared with the national share of 29%. Their share increased from 34.5% in March 2025, highlighting their significant role in financing the state’s small business segment.
For enterprises with aggregate credit exposure below Rs 5 crore, manufacturing accounted for 33.8% of Tamil Nadu’s portfolio. Between March 2023 and March 2026, the sector recorded a three-year CAGR of 3.2%, reflecting its maturity, while growth across the top five industry clusters was increasingly driven by non-traditional districts.
Deep Dive on Enterprise Term Loans
The enterprise term loan portfolio, excluding Loan Against Property, commercial vehicle and construction equipment loans, stood at Rs 6.7 lakh crore in March 2026, accounting for 25.9% of the overall term loan portfolio outstanding across sole proprietors and enterprises.
Growth moderated to 4.7% year-on-year in March 2026 from 14.5% a year earlier, highlighting opportunities to finance technology upgradation, sustainability initiatives and capacity expansion within the MSME sector. Active enterprise term loans declined by 2.7% year-on-year in Mar’26 indicating slower account additions alongside a shift towards higher-ticket-size lending.
Asset quality remained stable, with PAR 31–90 and PAR 91–180 at 3.6% and 1.6%, respectively of Mar’26. Manufacturing accounted for 31.3% of enterprise term loan exposure, while services and trading together represented 47.6%, reflecting a diversified sector mix. Growth in manufacturing-linked enterprise term loans remained concentrated in key industrial districts, with Bengaluru, Jaipur, Pune and Rajkot emerging as important growth drivers.
The report highlights the resilience of India’s small business credit ecosystem, supported by sustained portfolio growth, stable asset quality and expanding credit penetration, while underscoring Tamil Nadu’s position as a mature and resilient market.
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