Have an empathetic approach towards MSMEs facing financial distress, RBI Dy Guv Swaminathan tells lenders

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RBI Deputy Governor Swaminathan J on Monday emphasised the importance of fair lending practices, ensuring transparency and an empathetic approach towards MSMEs (micro, small & medium enterprise) facing financial distress.

This observation comes in the backdrop of banks’ credit to MSMEs slowing to about 12 per cent year-on-year (to stand at ₹11,24,377 crore) as on January 24, 2025 as compared with 14 per cent y-o-y growth (to stand at ₹10,02,794 crore) as on January 26, 2024.

About five years ago, the Expert Committee on MSME (constituted by RBI) estimated the gap between the credit needs of MSMEs and the available supply (also known as credit gap) to be between ₹20 and ₹25 lakh crore.

Acknowledging key challenges such as financial literacy gaps, information asymmetry, and delayed payments, the Deputy Governor stressed the need for digital solutions, alternative credit assessment models, and greater participation in platforms like the Trade Receivables Discounting System (TReDS).

Swaminathan made the aforementioned observations in his keynote address at the 29th meeting of the Standing Advisory Committee (SAC) to review the flow of credit to MSMEs in Ahmedabad.

The Deputy Governor, reaffirmed the Reserve Bank’s commitment to strengthening institutional credit support through initiatives like the Unified Lending Interface (ULI), the Account Aggregator framework, and the Regulatory Sandbox even as he underscored the pivotal role of the MSME sector in India’s economic development.

Delayed payment to MSMEs

In a speech last December, Swaminathan noted that to address the issue of delayed payment to MSMEs, RBI has introduced several innovations.

“The Trade Receivables Discounting System facilitates MSMEs’ trade receivable financing through electronic platforms. The Account Aggregator (AA) framework and inclusion of GSTN (Goods and Services Tax Network) in the AA ecosystem streamline financial data access for MSME lending. More recently, the Unified Lending Interface , launched as a pilot program in August 2023, allows MSMEs to access tailored, frictionless credit using digital data,” he then said.

Swaminathan had noted that MSMEs can increase the transparency over their level of business activity and financials, which, in turn, will enhance their credibility and may qualify them for priority sector lending and government schemes, by reinforcing their trustworthiness in the eyes of financial institutions.





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