New Delhi, March 19 (NationPress) The demand for credit among micro, small, and medium enterprises (MSMEs) is anticipated to remain robust, propelling India's expected credit growth to approximately Rs 26 trillion in FY26, reflecting a year-on-year increase of about 14.3 percent, according to a report released on Thursday.

For FY27, credit growth is forecasted to decelerate to between 11.3-12 percent, translating to an incremental growth of Rs 23.5 to Rs 25 trillion, as stated in the collaborative report by ICRA Limited and ASSOCHAM.

This expected moderation is perceived as a natural adjustment following a strong performance in the previous year, rather than a decline in demand.

The report highlights a significant structural gap in financial access that continues to hinder the MSME sector, indicating that overall bank credit growth is likely to remain stagnant, with MSMEs and retail sectors driving the incremental growth.

Saurabh Sanyal, Secretary General of ASSOCHAM, emphasized that enhancing financial access for MSMEs is vital for maintaining inclusive growth, ensuring that the benefits of economic development are shared across various regions and sectors.

K. Ravichandran, Executive Director of ICRA Ltd, remarked that while the financial system is more robust and resilient than in previous times, the evolving credit landscape necessitates a departure from conventional lending practices.

Credit demand is projected to remain “buoyant,” backed by strengthening economic activity, improved balance sheets across industries, and ongoing formalisation, the report indicated.

MSMEs have emerged as pivotal contributors to economic growth, particularly as supply chains evolve and smaller businesses integrate into formal production systems, stimulating growth in both urban and semi-urban markets.

The report also noted that formalisation efforts, enhanced classification thresholds, and supportive policies have increased credit visibility, allowing lenders to better evaluate borrower profiles and broaden credit access.

It highlighted that formalisation has gradually raised the share of MSMEs in new bank lending, with improved transparency and data availability facilitating better credit underwriting and risk assessment.

However, a significant structural credit gap remains due to diverse risk profiles, insufficient collateral, and lack of information transparency, which impede the timely and adequate flow of credit, especially for smaller businesses and those operating outside fully formalised frameworks.