How the Iran war threatens India’s nascent credit recovery

In summary, the recent uptick in credit is driven by lending to MSMEs, NBFCs and retail customers. By itself, this makes for an excellent loan book composition. MSMEs are crucial to India’s economy, accounting for approximately 35.4% of manufacturing, 48.58% of exports, and 31.1% of GDP; in addition, the sector is the country’s second-largest employer. Clearly, meeting MSME financing needs is equivalent to strengthening overall economic growth and incomes. Retail lending funds domestic household consumption, which is the mainstay of India’s economy. NBFCs act as critical intermediaries, complementing banks by extending reach, speeding up processing, and deepening credit penetration across both households and small businesses.