New Delhi, July 31 -- Mumbai: India's top NBFCs have flagged early signs of stress in small business loans following a sharp slowdown in spending by some states, weak borrower cashflows, slackening credit demand and rising delinquencies even in once-resilient segments.

Industry executives said demand is slowing also because small businesses are facing delayed payments from central and state governments, and shrinking profit margins amid a broader economic slowdown.

While Bajaj Finance has pointed out a sudden buildup of stress, Shriram Finance has seen challenges in some states. Bajaj Finance has an MSME (micro, small and medium enterprise) loan book of Rs.52,428 crore, and reported a gross bad loan ratio of 1.76% in Q1 in the segment, ...