India’s digital payments ecosystem may be among the world’s most advanced, but millions of small businesses continue to struggle for access to formal finance, with only 14 per cent of micro, small and medium enterprises (MSMEs) able to secure institutional credit, according to Deloitte’s latest State of Financial Services in India report.The report said the remaining MSMEs, largely micro-enterprises, continue to rely on informal and often expensive sources of funding.“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.”
Credit gap exceeds Rs 25 lakh crore
According to the report, India’s MSME credit gap stood at around Rs 25 lakh crore as of March 2025.However, Deloitte estimated 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 said improving access to finance for small businesses will be crucial as India seeks to sustain its position as one of the world’s fastest-growing major economies.
Digital finance grows, but inclusion gaps remain
The report highlighted India’s significant progress in expanding 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.Despite these gains, Deloitte said major inclusion gaps persist. Around 16 per cent of bank accounts remain inactive, while only 15 per cent of Indian adults access formal credit, compared with a global average of 24 per cent.Insurance penetration also remains low at 3.7 per cent of GDP, roughly half the global average, according to news agency ANI.
Deloitte calls for policy reforms
The report said structural bottlenecks continue to restrict financial inclusion and called for renewed policy focus to improve credit delivery.“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 access to finance.Deloitte added that improving credit availability, expanding insurance coverage, strengthening financial literacy and reducing digital access gaps would be essential to ensure financial inclusion translates into wider economic participation, stronger financial resilience and sustainable long-term growth.The report also noted that deeper financial inclusion across semi-urban, rural and underserved regions could create new demand drivers for the economy while improving resilience against external shocks.
