Credit Access for Small Enterprises

Persistent MSME Financing Gaps Despite Rising Formal Credit

Micro and small enterprises still cannot raise the formal credit they need, even though lending to the sector has grown to a record share of bank credit. Both are true at once, and they are recorded separately here rather than reconciled into one number: MSME lending is reported to have reached an all-time high of 17.7 per cent of total bank lending in 2024-25, while the Parliamentary Standing Committee on Finance put the sector's financing gap at ₹20-25 lakh crore and found that fewer than 40 per cent of MSMEs borrow from the formal system. The Committee's estimate dates from 2022 and has not been officially re-estimated. Collateral and documentation requirements are recorded as a documented barrier for enterprises that hold few fixed assets; this entry does not assert credit rationing as a proven mechanism, because no source consulted establishes it as one.