Chennai: India’s small business lending continued to grow at a healthy pace in FY26, with the total outstanding credit portfolio rising 13.4% year-on-year to Rs 49.2 lakh crore as of March 2026, although the growth rate moderated from 17.3% a year earlier, according to the CRIF–SIDBI Small Business Spotlight Report.The sector added nearly Rs 5.9 lakh crore in outstanding credit during the year, taking the portfolio from Rs 43.3 lakh crore in March 2025 to Rs 49.2 lakh crore in March 2026. On a sequential basis, the portfolio increased from Rs 47.8 lakh crore in Dec 2025.The number of active small business loans also continued to rise, reaching 7.5 crore in March 2026 from 6.7 crore a year earlier, representing 11.7% year-on-year growth.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 10 states accounted for 72% of the overall portfolio outstanding. Growth was led by Uttar Pradesh, which recorded 18.5% year-on-year growth and 4.5% quarter-on-quarter growth, while Andhra Pradesh posted 16.5% year-on-year growth and led on a sequential basis with 5.6% quarter-on-quarter growth. Meanwhile, locations beyond the top 100 cities outperformed, recording a 21.6% CAGR between March 2023 and March 2026.Asset quality improved during the year, with Portfolio at Risk (PAR) 90+ declining to 4.0% in March 2026 from 4.2% in March 2025, driven by improvements across both the PAR 91-180 and PAR 180+ buckets.
