Bangalore, July 3: India’s commercial credit market is seeing a shift in borrower composition, with individual borrowers with business-oriented loans now forming a meaningful share of overall commercial credit balances, according to the latest MSME Pulse released by TransUnion CIBIL and the Small Industries Development Bank of India .
Loans to individuals accounted for 28% of outstanding commercial balances, while loans to entities accounted for 72%. Individual borrower balances grew 1.8 times during the three-year period between March 2023 and March 2026, compared with 1.5 times growth in entity borrower balances during the same period.
The report finds that outstanding commercial credit stood at ₹65.8 lakh crore as of March 2026, across 4.4 crore active commercial trades. This is a year-over-year growth of 14% compared to the total outstanding credit of Rs 57.9 lakh crore as of March 2025.
Individual Borrowers Form a Sizeable Business Credit Segment
As of March 2026, 2.8 crore individual borrowers had active business-oriented loans. Of these borrowers, 43% were early-stage as commercial entities with credit history of less than 24 months, highlighting a borrower segment that is active in business-purpose borrowing while still being relatively new as commercial entities. Almost half (48%) the share of the total Non-Banking Financial Companies’ Commercial Balances pertained to Individual Borrowers. All other lender categories have a much lower share, with private banks the second largest at 24% of the commercial balance share among individual borrowers.
The individual borrower segment has been increasingly visible across key commercial credit products. Loans against property formed the largest share of outstanding balances for this borrower group, followed by commercial vehicle loans and unsecured business loans. At a product level, individual borrowers accounted for 68% of loan against property balances, 76% of commercial vehicle balances and 67% of unsecured business loan balances. The report notes that loans against property, commercial vehicle loans, unsecured business loans, term loans, overdraft and cash credit together formed ~87% of outstanding commercial credit balances.
Bhavesh Jain, MD & CEO, TransUnion CIBIL, said:
“In India’s MSME economy, the entrepreneur and the enterprise are often deeply connected, particularly in the early years of business growth. A proprietor may borrow in an individual capacity, but the credit is frequently linked to business activity, working capital needs or asset creation. This makes individual business borrowing an integral part of how commercial credit is evolving, and it deserves to be understood within the broader MSME credit landscape.
“As MSMEs grow, their credit needs also change, from small-ticket working capital to larger, sector-led funding requirements. The real opportunity for the credit ecosystem lies in understanding this progression with greater clarity, especially as borrowers move from individual business borrowing to entity-level credit, or from trade-led borrowing to manufacturing-led expansion.”
Formal Credit Access Remains a Large Opportunity
The share of new-to-credit entities in origination volumes declined from 52% in FY23 to 42% in FY26, indicating that the pace of first-time formal credit onboarding has moderated in recent years.
NTC originations among commercial entities were concentrated in smaller ticket sizes. The report finds that 60% of these originations were in the ₹2 lakh to ₹10 lakh ticket-size segment, while 34% were in the ₹10 lakh to ₹2 crore segment. It also notes that 75% of ₹2 lakh to ₹2 crore NTC entity borrowers had prior retail credit experience, showing that first-time entity borrowers may enter formal commercial credit through different borrower pathways.
Emerging Pockets Of Risk in Specific Borrower Segments
While overall commercial credit portfolio performance remained stable as of March 2026, the report indicates elevated delinquency levels in certain borrower and product segments. Delinquency (measured as share of balances in 90+ Days Per Due or classified sub-standard) in unsecured business loans to entities stood at 7.2%, up 274 basis points over three years. The ₹2 lakh to ₹10 lakh entity borrower segment recorded delinquency of 5.6%, up 111 basis points over the same period.
Signs of stress were also seen in early delinquencies as well, for both unsecured business loans to entities and for the ₹2 lakh to ₹10 lakh entity borrower segment. For originations in the March 2025 ending quarter, for unsecured business loans to entities, early delinquencies were 2.9 times higher, while for the ₹2 lakh to ₹10 lakh entity borrower segment, early delinquencies were 2.1 times higher than the overall early delinquency of 3.4% for loans to entities originated in the same period.
Sectoral Patterns Point to Different MSME Credit Structures
The report shows that commercial credit patterns vary across sectors by exposure size and geography. Textiles, professional services, wholesale trade and infra-linked industries are led by the ₹10 lakh to ₹2 crore exposure segment. Maharashtra and Gujarat the leading states across key industries such as textiles, food processing. The report identifies manufacturing as a sector with strong concentration in industrial clusters.
Trade showed a different pattern, with retail trade anchored in the ₹2 lakh to ₹10 lakh exposure segment and wholesale trade led by the ₹10 lakh to ₹2 crore segment basis share of entities with live loans. Uttar Pradesh ranked first in both retail and wholesale trade counts, while Uttar Pradesh, and West Bengal appeared among the other leading states. In professional services, the report shows a higher share of entities in small exposure segments of ₹10 lakh to ₹2 crore, with Maharashtra, Karnataka and Tamil Nadu among the leading states.
Mr Jain said:
“MSMEs remain central to India’s enterprise base, employment creation and regional economic growth. As more small businesses seek formal credit, it is important to recognise the diversity within the MSME segment. A micro enterprise seeking working capital, a trade borrower operating in a local market and a manufacturing unit looking to scale will have different credit needs, business cycles and growth paths. Expanding formal credit access for MSMEs has to go hand in hand with a deeper understanding of these differences. A more granular view across sectors, ticket sizes and geographies can help the ecosystem serve smaller and emerging enterprises while maintaining a focus on sustainable credit growth.”