Rs 1 Lakh Crore Digital Loan Boom: How PSBs are Leading India’s Credit Tech Leap

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Public Sector Banks (PSBs) in India are projected to disburse Rs 1 lakh crore in digital-footprint-based loans in FY26, driven by initiatives to leverage MSME digital data for credit assessments. This marks a transformation in lending, offering faster, paperless loans while expanding MSME financial inclusion nationally.

Public Sector Banks (PSBs) in India are poised to make a significant leap in digital lending, with digital-footprint-based loan disbursals expected to reach Rs 1 lakh crore in FY26. This innovative lending model assesses creditworthiness of MSMEs based on their digital footprints, including income tax, GST, PAN data, and utility bills, providing an alternative to traditional credit evaluation solely based on assets or turnover.

Since January 2025, the State Bank of India (SBI) has been leading this digital push, contributing around Rs 75,000 crore of the projected total, with other PSBs collectively expected to reach Rs 25,000 crore. The model enables MSMEs to apply online anywhere, reduces paperwork, offers instant in-principle sanction, and expedites credit processing through automated end-to-end straight-through processing (STP). The digital footprint loan model also reduces dependency on physical collateral, especially for loans covered under CGTMSE (credit guarantee scheme).

The government plans to increase loan thresholds from the current Rs 50 lakh to Rs 1-2 crore, enabling PSBs to sanction larger loans digitally. This initiative is part of the Union Budget 2024-25 to strengthen MSME credit access and promote digital financial inclusion.

Notable Updates:

Projected Rs 1 lakh crore digital-footprint loan disbursal by PSBs in FY26, with SBI accounting for ₹75,000 crore.

Digital lending offers instant, paperless loan applications and reduced turnaround time.

Loan thresholds expected to rise to Rs 1-2 crore, expanding lending capacity.

Enhanced credit to MSMEs based on data such as GST, PAN, income tax, and electricity bills.

Reduced need for physical collateral and improved credit accessibility under CGTMSE.

Full digital transformation underway for Pradhan Mantri Mudra Yojana (PMMY) applications.

Model boosts MSME financial inclusion, streamlines loan processing, and leverages technology for credit decisions.

This digital lending surge signals a pivotal moment in banking, improving speed, transparency, and MSME access to formal credit—the backbone of India’s growth story.

Sources: Financial Express, The Financial Express Facebook, Business Standard, IANS, Economic Times.