Mumbai: Reserve Bank Deputy Governor Swaminathan J on Monday acknowledged the critical role of the MSME sector and asserted that it is the key driver of India’s economic growth and employment generation.
Reaffirming the Reserve Bank’s commitment to further strengthen the credit ecosystem for MSMEs, he said that Unified Lending Interface (ULI), Account Aggregator framework, and the Regulatory Sandbox are facilitating data-driven and cash-flow-based lending.
During the 30th Meeting of the Standing Advisory Committee (SAC) to review the flow of credit to the MSME sector, he touched upon the recent regulatory measures to ease the difficulties faced by the sector, including the waiver of prepayment charges on floating-rate loans extended to individuals and micro and small enterprises, and the relaxation in reporting under the Export and Import Data Processing and Monitoring Systems (EDPMS/IDPMS) to ease compliance burden for small exporters and importers.
Addressing the challenges of information asymmetry, financial literacy gaps, and delayed payments, the Deputy Governor emphasised the need to promote wider adoption of digital solutions like the Trade Receivables Discounting System (TReDS), encourage alternative credit assessment models, and ensure fair, transparent, and empathetic lending practices for the promotion of rehabilitation of distressed but viable units.
He also urged Micro, Small and Medium Enterprises (MSME) associations to play a greater role in capacity building and bridging information gaps to help enterprises better leverage formal financial channels, the Reserve Bank said in a statement.
During the meeting held in Coimbatore, the SAC reviewed the flow of credit to MSMEs and deliberated on ways to address the issues related to the credit gap in the sector, cash-flow based lending and digital solutions for improved credit linkage, accelerating adoption of TReDS, enhancing the usage of credit guarantee schemes, and revival and rehabilitation of MSME units, among others, it said.
During the interactive session, the industry associations highlighted the challenges posed by the uncertainty arising from geopolitical situations and sought the intervention of government, regulators and banks, it said.
The meeting concluded with responses from the officials and an assurance that the feedback and suggestions will be duly examined by the concerned stakeholders, it added.