Published: [October 5, 2026]
StartupFeed Quick Take
- MSME fintech lenders cut disbursals in FY26 to protect asset quality as small-business defaults rose.
- Lendingkart’s FY26 net loss widened 16% to Rs 333.3 crore. Its revenue fell 62% to Rs 327.3 crore.
- Overall MSME credit stayed in growth: CRIF High Mark put outstanding credit near Rs 46 lakh crore as of April 2026, up about 12.8% from a year earlier.
MSME fintech lenders in India cut back their loan books in FY26, choosing asset quality over growth as more small borrowers missed repayments. The shift was reported by The Economic Times on [October 5, 2026].
The pullback was sharpest at the stressed end of the sector. NeoGrowth’s assets under management fell about 21.5% in FY26, the report said. At Lendingkart, the drop was far steeper, near 74%.
Not every lender shrank. Some grew more slowly but still expanded, helped by business models that reach beyond balance-sheet lending. The broad direction, though, was tighter underwriting and fewer new loans.
What the lenders did in FY26
The stress is clearest in Lendingkart’s own numbers. The Ahmedabad-based NBFC reported a net loss of Rs 333.3 crore for FY26, 16% wider than the year before. Its operating revenue fell 62% to Rs 327.3 crore, from Rs 866.9 crore in FY25.
The fall ran through every income line. Interest income dropped 73% to Rs 227 crore. Fee and commission income fell 76% to Rs 107.6 crore. Lower provisions, Rs 290 crore against Rs 523 crore a year earlier, were not enough to offset the revenue collapse.
Lendingkart had already swung to a Rs 288 crore loss in FY25, when gross bad loans rose to 4.33% from 2.90% a year earlier. Fullerton Financial Holdings, a Temasek-owned entity, has been set to take a majority stake as the company raises fresh capital.
NeoGrowth, the Mumbai lender that pioneered POS-based loans to shopkeepers, took a gentler route but still trimmed its book by about a fifth in FY26. The two paths, a sharp cut at Lendingkart and a measured one at NeoGrowth, show the same instinct: lend less, lose less.
Why the pullback happened
Unsecured small-business loans went bad faster than lenders expected. Credit-rating agencies had flagged the risk through FY26. In a November 2025 report, Crisil Ratings pointed to rising stress in early delinquency buckets, led by unsecured MSME loans and small-ticket loans against property.
Phil-style caution spread to the biggest names too. Bajaj Finance cut its unsecured MSME loan volumes by 25% and guided for MSME book growth of just 10% to 12% in FY26, down from 18% in an earlier quarter. When the largest NBFC pulls back, smaller fintech lenders have little room to keep lending hard.
Krishnan Sitaraman, who is chief ratings officer at Crisil Ratings, set out the sector’s new stance in the agency’s report:
“NBFCs will adopt risk-calibrated growth in MSME and unsecured lending segments given heightened customer leverage.”
Krishnan Sitaraman, chief ratings officer, Crisil Ratings. From the Crisil Ratings report, November 24, 2025.
The wider market is still growing
A shrinking fintech loan book does not mean MSME credit is shrinking. It is not. A report by CRIF High Mark put total MSME credit outstanding near Rs 46 lakh crore as of April 2026, up about 12.8% from a year earlier.
The growth is moving to steadier hands. Public sector banks and secured lenders are taking share, while unsecured fintech lenders go slow. Bajaj Finance alone grew total assets under management 24% to Rs 4.6 lakh crore by September 2025, even as it cut its MSME exposure.
So two things are true at once. The overall market is bigger, and the riskiest lenders are smaller. FY26 was the year those two lines split apart.
What this means for you: If you run an MSME and borrow from a fintech NBFC, fresh unsecured credit is harder to get this year. Keep your repayment record clean and keep a secured lender or bank option open before you need the money.
StartupFeed Insight
The headline is not that fintech lending is dying. It is that two different books are being written. Lendingkart’s 62% revenue fall and 74% AUM cut are a balance sheet in retreat, not a market in retreat. The lenders who survive FY26 will be the ones who lend through others: co-lending partners, banks, and secured products, where the risk sits somewhere stronger. Watch the FY27 numbers from NeoGrowth and the co-lending players. If their books grow again while bad loans stay flat, the sector has reset its risk and is ready to lend. If books stay frozen into the second half of FY27, the stress is deeper than a one-year clean-up. The split between the overall market and the weakest lenders is the number to track.
By Avinash Mishra, Business Correspondent
Have a tip? Write to us at editorial@startupfeed.in.
Disclaimer: This article is for information only and is not investment advice. StartupFeed and its authors are not SEBI-registered investment advisors. Please speak to a SEBI-registered advisor before investing.
Liked this story? Follow StartupFeed on Google so our reporting reaches you first.
