A few weeks ago in Meerut, I met Vinod, a small manufacturer who proudly showcased his motorcycle spring unit. Two years ago, a ₹7 lakh loan allowed him to start his own brand. “Now we’re suppliers, not just labourers,” he smiled.
Stories like Vinod’s are quietly rewriting India’s growth narrative. At the heart of this transformation lies something once elusive but now more accessible than ever: MSME credit.
MSMEs: India’s Economic Backbone
India’s Micro, Small and Medium Enterprises (MSMEs) contribute nearly 29% to GDP, 45% to exports, and employ over 110 million people. Yet for decades, these enterprises were starved of credit—trapped in informal lending, high-interest rates, and bureaucratic roadblocks.
That tide is turning.
The Rise of MSME Lending in 2025
As of March 2025, MSME credit surpassed ₹28.4 lakh crore, growing over 15% year-on-year. Medium-sized businesses alone saw a 22.6% spike in credit flow. More significantly, loan delinquencies are at a five-year low—proof that small businesses, when empowered, are responsible borrowers.
What’s Driving the MSME Credit Boom?
1. Fintech Lending Revolution
Digital-first NBFCs and fintechs like FlexiLoans and Biz2X are using real-time data—GST filings, sales history, transaction footprints—to issue loans in under 48 hours. Even e-commerce players like Flipkart are offering credit to sellers through platforms like super.money. This is access with dignity and speed.
2. Progressive Policy and Regulation
The 2025-26 Union Budget doubled collateral-free loan limits under CGTMSE to ₹20 crore. RBI’s Unified Lending Interface (ULI) promises to do for lending what UPI did for payments—transform access, speed, and trust in formal credit.
3. Formalization and Digital Adoption
Over 6.2 crore MSMEs are now registered on Udyam, up from 2.5 crore the previous year. With 90% of MSMEs using digital payments and nearly 20% borrowing via fintechs, India’s small businesses are steadily embracing the digital economy.
Credit Is Changing Lives—Literally
From new looms in Surat to second outlets in Patna, the impact of accessible MSME credit is real. Women entrepreneurs, previously excluded, are building scalable enterprises. More jobs, formal wages, tax revenue—and most importantly—real economic inclusion is taking shape.
The Gap That Still Remains
Despite strong momentum, India’s MSME credit gap remains at ₹20–25 lakh crore. Micro-enterprises still struggle with documentation, lack of awareness, and rigid collateral requirements from traditional banks. Predatory lending risks from some digital platforms also demand stronger regulatory oversight.
What the Future Looks Like
By 2028, MSME lending in India could exceed ₹50 lakh crore. But it’s not just about scale. It’s about creating a smarter, fairer, and more inclusive credit ecosystem where:
- Creditworthiness is assessed via real-time data
- Risk-based pricing is dynamic
- Embedded finance supports lending within business platforms
- Flexible repayment options match MSME cash flows
UNCIA: Driving India’s MSME Credit Transformation
At Uncia.ai, we’re not just observers—we’re enablers of this transformation. Our modular lending platform is helping India’s leading financial institutions reimagine MSME credit.
✅ Uncia Prime
A next-gen Loan Origination System (LOS), Prime automates credit workflows—reducing paperwork, improving approval speed, and tailoring loan offerings to MSME profiles.
✅ Uncia Leap
Our advanced Loan Management System (LMS) ensures real-time repayment tracking, portfolio health, and intelligent interventions, empowering lenders to minimize risk and maximize impact.
✅ Uncia Flow
Designed for Supply Chain Finance, Flow digitizes invoice processing and unlocks working capital deeper into the MSME value chain, especially for smaller vendors typically overlooked by traditional lenders.
Building the Future, One Loan at a Time
MSME credit is no longer just a policy priority—it’s a growth engine. And as India pushes toward becoming a $5 trillion economy, empowering its entrepreneurs through smart credit infrastructure is non-negotiable.
At Uncia, we’re proud to be building that infrastructure—one loan, one business, one success story at a time.
Ready to transform your MSME lending strategy?
Reach out to us at sales@uncia.ai or visit www.uncia.ai to learn how our AI-powered lending solutions can help your institution grow responsibly and sustainably.
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Boilerplate:
At Uncia, our award-winning AI-driven Loan Origination (Prime), Loan Management (Leap) and Supply Chain Finance (Flow) products help you stay on the cutting-edge of technology to simplify, accelerate, and transform your lending ecosystem.
Abhinav Tyagi is a Management Trainee at Uncia, from IIM Kozhikode
