Credit Flow to MSMEs Accelerates Amid Improving Financial Conditions, says Economic Survey
India has retained strong growth momentum which is expected to grow by 6.8 - 7.2% in FY27. A key factor behind sovereign credit rating (e.g., R&I, Japan) upgrades has been prudent fiscal management.
According to the Economic Survey 2026, regulatory developments in the banking sector include Public Sector Banks (PSBs) introducing a credit assessment model (CAM) which had a positive impact on the ease of doing business for MSMEs. It had been introduced in the Union Budget 2024-25. PSBs were to build their in-house capability to assess MSMEs for credit, instead of relying on external assessment. PSBs developed this new CAM, based on the scoring of digital footprints of MSMEs in the economy. CAM leverages the digitally fetched and verifiable data available in the ecosystem and devises automated journeys for MSME Loan Appraisal using objective decisioning for all loan applications and model-based limit assessment for both Existing to Bank (ETB) as well as New to Bank (NTB) MSME borrowers. For MSME promoters, the benefits are practical and immediate. The model enables the "submission of application from anywhere through online mode," effectively removing the necessity for physical branch visits.
Another one of the many steps taken by the Government to enhance the credit flow to the MSME sector was the free registration of MSMEs through ''Udyam Registration Portal''. This was done in order to speed improvement in Ease of Doing Business. Small business financing in India has undergone a massive digital transformation, with Public Sector Banks (PSBs) sanctioning more than 3.96 lakh MSME loan applications between April 1 and December 31, 2025.
In November 2025, bank credit to this sector increased by 21.8% compared to a 13% increase in November 2024. As of July 2024, the total number of MSMEs registered in the country on the Udyam Registration Portal and Udyam Assist Platform is 4.76 crore.
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