Only 14% of India's MSMEs have access to formal credit despite digital finance boom: Deloitte report
New Delhi, June 27
Only 14 per cent of India's micro, small and medium enterprises have access to formal credit despite the country's rapid advances in digital finance, leaving millions of businesses dependent on informal lenders, according to Deloitte's State of Financial Services in India report.
"Only 14% of Micro, Small and Medium Enterprises (MSME) have access to formal credit, leaving the majority of these enterprises (mostly micro-enterprises) dependent on informal, usurious financing," the report said.
It added that these are "not marginal shortfalls -- they are fundamental indicators of the critical need for deepening financial inclusion, and achieving broader economic growth."
According to the Deloitte report, India's MSME credit gap was estimated at around Rs 25 lakh crore as of March 2025. It noted that based on the sector's contribution to GDP and a healthy credit-to-GDP ratio, the formal credit gap could be "well over INR 50 lakh crore".
The report comes at a time when India is positioning its financial sector to support long-term economic expansion. It noted that India remains one of the world's fastest-growing major economies and that achieving higher growth will require stronger financial inclusion and better access to credit for underserved businesses.
Despite the credit gap, the report highlighted significant progress in financial access. Around 89 per cent of Indian adults now have a financial account, while the Unified Payments Interface (UPI) processes more than 20 billion transactions every month and accounts for nearly half of global real-time payment volumes.
However, Deloitte cautioned that major gaps remain. About 16 per cent of bank accounts remain inactive, only 15 per cent of adults access formal credit compared with a global average of 24 per cent, and insurance penetration at 3.7 per cent of GDP is roughly half the global average.
Calling for renewed policy focus, the report said structural bottlenecks continue to limit financial inclusion.
"The need to scale cash-flow-based MSME lending through AA (Account Aggregator) framework (Credit should and can become ridiculously cheap and easy for every small business owner - the small supplier, the shopkeeper, the contractor, the artisan and various others)," it said while outlining reforms needed to improve credit delivery.
The report added that addressing these structural challenges by improving credit access, expanding insurance coverage, strengthening financial literacy and narrowing digital access gaps will be critical to ensuring that financial inclusion translates into broader economic participation, financial resilience and sustainable growth.
It said deeper inclusion across semi-urban, rural and underserved segments can also create new demand drivers for the economy while strengthening resilience against external shocks.
— ANI
Reader Comments
Finally a report that acknowledges the gap! UPI has transformed how we transact but credit access is the next frontier. The Account Aggregator framework is promising if implemented correctly. But let's be honest - banks need to change their mindset about lending to small businesses. A street vendor with consistent UPI payments should be able to get working capital.
As someone from the US working with Indian suppliers, I've seen this firsthand. A friend in Bengaluru runs a textile export business and was denied a ₹15 lakh loan even with years of export orders. Meanwhile in the US, so many fintech startups are offering alternative credit scoring. India has the tech but needs the regulatory push. The 25 lakh crore gap is mind-boggling.
Look, the report is correct but blaming only banks is unfair. Many MSMEs don't maintain proper books, don't file GST returns, and don't understand formal credit. I've seen tailors and welders in my town who have cash flows that could justify loans but they refuse to share bank statements. Financial literacy is equally important. Two sides of the same coin.
I'm an economist based in Mumbai and this data is deeply concerning. That 16% inactive account rate tells you something - people open accounts for government schemes but don't use them. The real opportunity is using UPI transaction data for credit scoring. A chaiwala's 500 UPI payments a month should speak louder than a property document. Let's use the data we have.
My father runs a small manufacturing unit
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