Rapid Growth of Digital Finance: According to Deloitte’s ‘State of Financial Services in India’ report, even though India boasts one of the world’s most advanced digital payment systems, millions of small businesses continue to struggle to access formal finance. Only 14% of Micro, Small, and Medium Enterprises (MSMEs) can secure institutional credit. The report notes that the remaining MSMEs, predominantly micro-enterprises, still rely on informal and often expensive sources for funding.
“According to the report, only 14% of MSMEs get formal credit, which means most MSMEs, particularly micro-enterprises, rely on informal and high-interest financing. It further adds that these are “not merely minor gaps; they are fundamental indicators of the critical need to enhance financial inclusion and achieve broad-based economic growth.”
Credit Gap Exceeds ₹25 Lakh Crore
According to the report, India’s MSME credit gap stood at approximately ₹25 lakh crore as of March 2025. However, Deloitte estimates that based on the sector’s contribution to GDP and an optimal credit-to-GDP ratio, the formal credit gap could actually exceed ₹50 lakh crore.
Improving access to finance for small businesses will be crucial as India seeks to maintain its position as one of the world’s fastest-growing major economies, the report concludes.
Digital Finance has Grown, yet Inclusion Gaps Persist
The report highlights India’s significant progress in expanding financial access. Approximately 89% of Indian adults now hold a financial account, while the Unified Payments Interface (UPI) processes over 20 billion transactions monthly, accounting for nearly half of the global real-time payment volume.
Despite these gains, Deloitte noted that significant gaps in inclusion remain. About 16% of bank accounts are inactive, and only 15% of Indian adults utilise formal credit, compared to a global average of 24%. According to news agency ANI, insurance penetration stands at 3.7% of GDP, roughly half the global average. Deloitte called for policy reforms. The report states that structural hurdles continue to limit financial inclusion, necessitating a renewed policy focus to improve credit delivery.
Outlining the reforms needed to enhance access to finance, the report states, “Cash-flow-based MSME lending needs to be scaled up widely through the AA (Account Aggregator) framework (credit should, and can, be made extremely affordable and accessible for every small business owner, be they small suppliers, shopkeepers, contractors, artisans, or others).”
Deloitte further added that improving credit availability, expanding insurance coverage, strengthening financial literacy, and bridging the digital access gap are essential to ensuring that financial inclusion translates into broad-based economic participation, robust financial resilience, and sustainable long-term growth.
The report also states that deep financial inclusion in semi-urban, rural, and underserved areas can generate new demand drivers for the economy, while also enhancing resilience against external shocks.
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