Small cities, big sales: Tier II and beyond regions drive festive loan demands for MSMEs
Tier II and beyond cities such as Ghaziabad and Rangareddy are expected to drive 70% of MSME festive credit demand, with disbursals hitting all all-time high at Rs 3.45 lakh crore.
Once seen as untapped demand pockets, India’s smaller cities such as Ghaziabad and Rangareddy have now emerged as active growth engines for Micro, Small and Medium Enterprises (MSMEs).
According to Flexiloans' latest report titled ‘MSME Festive Lending 2025 Outlook Report’, more than 70% of festive loan demand will come from the smaller cities and towns, with Tier III cities alone accounting for 47%.
The report suggests that government initiatives like the Udyam Registration Portal have formalised a large number of small businesses. As of June 2025, 5.70 crore MSMEs were registered, bringing a large number of informal MSMEs into the formal financial system for the first time.
Credit demand is expected to hit a record Rs 3.45 lakh crore in Q3 FY2025, up from around Rs 2.9 lakh crore in FY2024.
Cities located within a 100 km radius of Tier I hubs, such as Ghaziabad, Gautam Budh Nagar, and Rangareddy, are witnessing over 60% growth in disbursements, aided by lower operating costs. Tier III towns are driving a significant share of this momentum, while the top five states—Maharashtra, Uttar Pradesh, Gujarat, Karnataka, and Tamil Nadu—contribute over 50% of overall demand.
Ready-made garments, FMCG, electrical goods, jewellery, groceries, and mobile phones and accessories are among the top segments this festive season. Parallelly, ecommerce GMV is projected to grow 20–25% YoY, reaching up to Rs 1.4 lakh crore, largely driven by Tier II and Tier III adoption.
The report also points to job creation, with festive hiring expected to surge by 15–18% this year.
FlexiLoans projects a 35–40% jump in festive loan applications, aligned with its historical trend of an ~80% spike during festive seasons.
The MSME-focused FlexiLoans enable small businesses in Tier II and beyond to access fast, transparent, and affordable credit. With easing inflation, GST 2.0 rollout, and robust digital adoption, this festive season could be one of the strongest ever for MSMEs outside India’s metros, the company says.