NBFCs emerging as key lender to India’s micro and small businesses

They outpaced banks in growing their share of MSME loans.

Non-bank finance companies (NBFCs) in India have emerged as a key player in lending to micro, small and medium enterprises (MSMEs), outpacing growth rates of banks.

NBFCs lending to MSMEs recorded a 32% compound annual growth rate (CAGR) from FY2021 to FY2024, outpacing the growth of such loans in private sector banks (20.9%) and public sector banks (10.4%), according to data from CareEdge Ratings.

The share of MSME credit in NBFCs’ overall loan portfolio has risen to 9.1% as of H1 FY2025, compared to 5.9% in FY2021.

Meanwhile, banks maintained relatively stable MSME exposure, from 16.2% to 16.9%, over the same period, according to the report.

India’s MSME sector, comprising at least 63 million businesses, presents a credit opportunity of over Rs 18 lakh crore or IDR180t.

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NBFC

Non-Bank Financial Company

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