Encouraged by digital-footprint-based lending by public sector banks (PSBs) crossing Rs 1 lakh crore in 2025-26, the government is nudging banks to increase ticket sizes for such loans to accelerate credit flow to micro, small and medium enterprises (MSMEs) in FY27.
Ticket sizes under the digital-footprint-based lending model vary across banks, ranging from as high as Rs 5 crore at the State Bank of India (SBI) to Rs 10 crore at Punjab National Bank (PNB) and around Rs 25 lakh at smaller PSBs, sources told FE.
PSBs shift to digital MSME credit checks
The Union Budget for 2024-25 had announced that PSBs would build in-house capabilities to assess MSME borrowers using digital footprints such as PAN, goods and services tax (GST) records, income tax data, electricity bills and other transaction trails. The model offers an alternative to the traditional approach of assessing creditworthiness primarily based on assets or turnover.
SBI, the country’s largest lender by assets, began digital-footprint-based lending in January 2025, while other PSBs rolled out the system from April 2025.
SBI leads surge in MSME credit growth
The initiative has significantly boosted MSME lending. SBI’s MSME credit growth rose nearly 28% year-on-year in FY26, compared with an aggregate growth of 18% across all PSBs. “Since the process has become robust, banks should now enhance the loan thresholds,” an official said, adding that PSBs are increasingly leading the core MSME credit market compared to their private sector peers.
Banks such as SBI and PNB are already carrying out due diligence to increase loan ticket sizes in line with their risk appetite. With non-performing assets (NPAs) continuing to decline, banks are also being encouraged to facilitate higher credit access for businesses to support their operational requirements.
PSBs reported their lowest-ever bad loan levels in FY26. Asset quality improved significantly, with the gross NPA ratio declining to 1.93% and the net NPA ratio falling to 0.39% as of March 31, 2026 — the lowest levels recorded historically.