Archive · 26 Aug 2026
Digital Payments Help Micro Businesses Secure More Formal Loans
Small businesses in India are getting more loans from formal lenders such as banks and finance companies.
Loans to the smallest businesses grew faster than loans to larger MSMEs.
Digital payments, tax records and bank transactions give lenders more information about how these businesses earn and spend money.
This can help businesses that do not have much property to offer as collateral.
They may use loans to buy stock, equipment or vehicles and to expand their work.
Overall, MSME loans grew strongly during the period described.
The quality of these loans also improved because fewer were classified as non-performing assets.
However, very small businesses still showed more early signs of repayment stress than larger MSMEs.
Credit to micro enterprises rose 28.8% year-on-year as of March, outpacing lending growth to small and medium enterprises.
Overall MSME credit expanded 22.8%, compared with 15.3% growth in retail loans during the period.
Digital payments, GST filings and electronic banking records are helping lenders assess small-business cash flows beyond physical collateral.
The overall MSME gross non-performing asset ratio declined to 2.8% in March, though micro enterprises had a 2.4% SMA-1 ratio.
BLS E Services said it facilitated more than Rs 36,800 crore in loans to about four lakh customers during FY25-26.
- Who
- Indian micro, small and medium enterprises, banks and non-banking financial companies are involved; the Reserve Bank of India reported the lending data.
- What
- Formal lending to MSMEs, especially micro enterprises, increased as digital records made small businesses easier for lenders to assess.
- When
- The main figures are reported as of March; BLS E Services provided its disbursement figures for FY25-26. The article also mentions a separate 19.4% MSME-credit figure through June.
- Where
- India, with the article datelined Mumbai.
- Why
- Digital payments, GST filings, electronic banking records and account aggregation are creating transaction trails that help lenders evaluate business cash flows and credit needs.
- Micro-enterprise credit growth
- 28.8% year-on-year as of March
- Small-enterprise credit growth
- 19.4% as of March
- Medium-enterprise credit growth
- 13.5% as of March
- Overall MSME credit growth
- 22.8% during the period
- MSME gross NPA ratio
- 2.8% in March
- Micro-enterprise SMA-1 ratio
- 2.4%, compared with 0.9% for small enterprises and 0.4% for medium enterprises
- BLS E Services loan facilitation
- More than Rs 36,800 crore for approximately four lakh customers during FY25-26
- Average loan size through BLS E Services
- Between Rs 8 lakh and Rs 10 lakh