Small businesses are propelling the demand for unsecured loans, with a 73% year-on-year surge from MSMEs in the September quarter. The demand is mainly from smaller cities, which experienced faster growth than metros during the quarter leading up to the festival season, an analysis of loan demand from 700 cities conducted by Paisabazaar showed. In Q2, demand in non-metro cities increased by 74%, while in metro cities. The lending industry's expansion into credit-starved segments like MSMEs is facilitated by digital advancements and an evolving data ecosystem. The estimated credit gap in the MSME sector stands at Rs 92 lakh crore. However, banks in India are grappling with mounting stress in small unsecured personal loans, especially in the below Rs 50,000 segment, prompting close monitoring from the Reserve Bank of India (RBI). Some banks have reported higher delinquencies, and the RBI has expressed concerns over the rising trend in unsecured loans.