Kolkata: Cash-flow based lending and adoption of digital solutions like the Trade Receivables Discounting System (TReDS) can improve credit linkage for the micro, small and medium enterprises (MSMEs), a Standing Advisory Committee headed by Reserve Bank of India deputy governor Swaminathan J suggested.
This was discussed at the 30th meeting of the Standing Advisory Committee (SAC) to review the flow of credit to the Micro, Small and Medium Enterprises (MSME) sector, held in Coimbatore on October 27.
Addressing the challenges of information asymmetry, financial literacy gaps, and delayed payments, the deputy governor underscored the need to promote wider adoption of digital solutions like TReDS, encourage alternative credit assessment models, and ensure fair, transparent, and empathetic lending practices for promotion of rehabilitation of distressed but viable units.
He also urged MSME associations to play a greater role in capacity building and in bridging information gaps to help enterprises better leverage formal financial channels.
The SAC reviewed the flow of credit to MSMEs and suggested the usage of credit guarantee schemes for increasing the credit penetration to the sector, which is a key driver of the country's economic growth, employment, and industrial and regional diversification.
The MSME sector contributes about 30% to India's GDP and accounts for about 45% of the country's exports.
Reaffirming the central bank's commitment to further strengthen the credit ecosystem for MSMEs, Swaminathan J referred to initiatives such as the Unified Lending Interface (ULI), Account Aggregator framework, and the Regulatory Sandbox, which are facilitating data-driven and cash-flow based lending.
During the interactive session, the industry associations highlighted that the uncertainty arising from the geopolitical situations multiplied the challenges for the sector. Top committee members assured that the feedback and suggestions will be duly examined by the concerned stakeholders.
The meeting was attended by the executive directors from RBI and top officials from the Ministry of MSME and the Department of Financial Services. Top executives from Small Industries development Bank of India, State Bank of India and Punjab National Bank were also present.
This was discussed at the 30th meeting of the Standing Advisory Committee (SAC) to review the flow of credit to the Micro, Small and Medium Enterprises (MSME) sector, held in Coimbatore on October 27.
Addressing the challenges of information asymmetry, financial literacy gaps, and delayed payments, the deputy governor underscored the need to promote wider adoption of digital solutions like TReDS, encourage alternative credit assessment models, and ensure fair, transparent, and empathetic lending practices for promotion of rehabilitation of distressed but viable units.
He also urged MSME associations to play a greater role in capacity building and in bridging information gaps to help enterprises better leverage formal financial channels.
The SAC reviewed the flow of credit to MSMEs and suggested the usage of credit guarantee schemes for increasing the credit penetration to the sector, which is a key driver of the country's economic growth, employment, and industrial and regional diversification.
The MSME sector contributes about 30% to India's GDP and accounts for about 45% of the country's exports.
Reaffirming the central bank's commitment to further strengthen the credit ecosystem for MSMEs, Swaminathan J referred to initiatives such as the Unified Lending Interface (ULI), Account Aggregator framework, and the Regulatory Sandbox, which are facilitating data-driven and cash-flow based lending.
During the interactive session, the industry associations highlighted that the uncertainty arising from the geopolitical situations multiplied the challenges for the sector. Top committee members assured that the feedback and suggestions will be duly examined by the concerned stakeholders.
The meeting was attended by the executive directors from RBI and top officials from the Ministry of MSME and the Department of Financial Services. Top executives from Small Industries development Bank of India, State Bank of India and Punjab National Bank were also present.