Only 14 per cent of India's micro, small and medium enterprises (MSMEs) have access to formal credit, according to Deloitte's State of Financial Services in India report. This leaves the vast majority of these businesses, particularly micro-enterprises, reliant on informal lenders charging high interest rates.
Credit gap estimated at Rs 25 lakh crore
The Deloitte report estimates India's MSME credit gap at around Rs 25 lakh crore as of March 2025. It further notes 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."
"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 stated. 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."
Digital finance progress but gaps remain
Despite the credit gap, India has made significant strides in financial access. Around 89 per cent of Indian adults now have a financial account, while the Unified Payments Interface (UPI) processes over 20 billion transactions monthly, accounting for nearly half of global real-time payment volumes.
However, Deloitte warns that major gaps persist: about 16 per cent of bank accounts remain inactive, only 15 per cent of adults access formal credit compared to a global average of 24 per cent, and insurance penetration at 3.7 per cent of GDP is roughly half the global average.
Reforms needed to scale MSME lending
Calling for renewed policy focus, the report highlights structural bottlenecks that limit financial inclusion. It recommends scaling cash-flow-based MSME lending through the Account Aggregator (AA) framework, stating: "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."
The report emphasizes that addressing these challenges—improving credit access, expanding insurance coverage, strengthening financial literacy, and narrowing digital access gaps—is critical for translating financial inclusion into broader economic participation, financial resilience, and sustainable growth.
Deeper inclusion across semi-urban, rural, and underserved segments can also create new demand drivers for the economy while strengthening resilience against external shocks, according to Deloitte.
