Business-purpose loans to individual entrepreneurs demonstrated faster growth than credit to commercial entities between 2023 and 2026, according to TransUnion CIBIL and SIDBI data. Individual borrowers now account for 28% of outstanding commercial credit balances as of March 2026, with total commercial credit reaching ₹65.8 trillion across 4.4 crore live loan accounts. Entrepreneurs have become a significant component of MSME financing, accounting for 68% of loan against property balances, 76% of commercial vehicle loans, and 67% of unsecured business loan balances. These products, along with term loans, cash credit and overdrafts, constituted 87% of outstanding commercial credit. As per TransUnion CIBIL, individual borrower balances grew 1.8 times during the three-year period between March 2023 and March 2026, compared with 1.5 times growth in entity borrower balances during the same period. The report noted that outstanding commercial credit rose 14% year-on-year, highlighting the significant expansion in the MSME lending market. Commercial lending to individuals has also outpaced enterprise credit over the last three years, registering a 22% compound annual growth rate (CAGR) compared with 14% for enterprises, reflecting the growing role of entrepreneurs accessing business credit in their individual capacity.
As reported by TransUnion CIBIL, 2.8 crore individuals had active business-purpose loans as of March 2026, with 43% being early-stage commercial borrowers with less than 24 months of commercial credit history. Nearly half of NBFCs' commercial loan balances were linked to individual borrowers, highlighting their growing role in financing small businesses. The report noted that loans against property formed the largest share of outstanding balances for this borrower group, followed by commercial vehicle loans and unsecured business loans. The individual borrower segment has been increasingly visible across key commercial credit products, with almost half (48%) of the share of the total NBFCs' Commercial Balances pertained to individual borrowers, with private banks the second largest at 24% of the commercial balance share among individual borrowers. As per TransUnion CIBIL, younger consumers and borrowers from semi-urban and rural regions continue to contribute significantly to credit growth, with 41% of first-time borrowers being from Gen Z, highlighting the rapid emergence of new borrower segments. Among new borrowers, nearly 75% in the ₹2 lakh-₹2 crore exposure segment already had prior retail credit experience, indicating that lenders are increasingly leveraging consumer credit histories while underwriting commercial loans.
Despite overall asset quality remaining stable, the report flagged emerging stress in parts of the commercial credit portfolio. Aggregate delinquency, measured as balances overdue by more than 90 days, stood at 1.8% in March 2026. However, delinquency in unsecured business loans to commercial entities rose to 7.2%, while the ₹2 lakh-₹10 lakh borrower segment recorded delinquency of 5.6%. Early delinquency trends were deteriorating, with unsecured business loans to entities originated in the March 2025 quarter recording 2.9 times higher delinquency than the overall portfolio, while the ₹2 lakh-₹10 lakh segment reported 2.1 times higher delinquency. The report noted that only about 27% of India's credit-eligible population currently uses formal credit facilities, leaving hundreds of millions of consumers either underserved or outside the formal lending ecosystem.
Commercial lending showed diverging trends across borrower categories, with the share of new-to-credit (NTC) entities in origination volumes declining from 52% in FY23 to 42% in FY26, indicating that the pace of first-time formal credit onboarding has moderated in recent years. This trend points to slowing organic expansion of the formal MSME borrower base even as the overall credit market grows. The report highlighted differentiated lender strategies across various ticket sizes. Public sector banks continue to dominate lending below the ₹10 lakh exposure segment, while NBFCs have steadily expanded their presence in the ₹10 lakh-₹2 crore category, gaining six percentage points of market share since March 2023, driven by secured lending, longer-tenure products and the graduation of borrowers from individual to enterprise credit. Private banks continue to dominate larger commercial exposures above ₹2 crore, accounting for 46% of balances in that segment. Credit to entities with exposures of ₹2 lakh-₹10 lakh expanded at a three-year compound annual growth rate of just 5%, the slowest among all segments, whereas borrowers with exposures above ₹10 lakh registered double-digit growth.
India's expanding credit market is introducing millions of first-time borrowers into the formal financial system, creating unprecedented challenges for loan origination systems. The country now relies on four licensed credit information companies (CICs): TransUnion CIBIL, Experian, Equifax, and CRIF High Mark, with TransUnion CIBIL remaining the most recognized among borrowers. However, lenders are discovering that relying on a single bureau can leave critical gaps in risk assessment, as credit data varies across bureaus due to differences in reporting timelines, lender participation, and data-matching methodologies. To address these challenges, many lenders are implementing bureau abstraction layers within their loan origination systems, which standardize bureau responses into common internal formats before passing to underwriting engines. The most advanced lenders are moving toward bureau orchestration, determining which bureau to access based on borrower profile, product category, and underwriting requirements. The Reserve Bank of India has directed regulated entities to report borrower information to credit information companies on a weekly basis beginning January 2026, replacing earlier reporting frequencies to improve credit information freshness and reliability.
