MSMEs key to India’s growth and jobs, says RBI deputy governor

Reserve Bank of India (RBI) Deputy Governor Swaminathan J on Monday said that the Micro, Small and Medium Enterprises (MSME) sector plays a vital role in driving India’s economic growth and creating employment opportunities.

Speaking at the 30th Meeting of the Standing Advisory Committee (SAC) held in Coimbatore, he reaffirmed the RBI’s commitment to support the MSME sector by strengthening the country’s credit ecosystem. He said that initiatives like the Unified Lending Interface (ULI), Account Aggregator (AA) framework, and the Regulatory Sandbox are helping banks and financial institutions adopt data-driven and cash-flow-based lending.

Swaminathan also mentioned several recent regulatory measures taken to ease the financial burden on small businesses. These include the waiver of prepayment charges on floating-rate loans for individuals and MSMEs, as well as relaxations in reporting requirements under the Export and Import Data Processing and Monitoring Systems (EDPMS/IDPMS) to make compliance simpler for small exporters and importers.

Addressing challenges such as information gaps, lack of financial awareness, and delayed payments, the Deputy Governor encouraged wider use of digital platforms like the Trade Receivables Discounting System (TReDS) and alternative credit assessment models. He also called on lenders to follow fair, transparent, and empathetic lending practices, especially when dealing with distressed but viable MSME units.

Swaminathan urged MSME associations to take a more active role in capacity building and spreading awareness, helping small enterprises access formal financial systems more effectively.

During the meeting, participants discussed ways to improve the flow of credit to MSMEs, enhance cash-flow based lending, increase adoption of digital tools, expand the use of credit guarantee schemes, and support the revival of struggling MSMEs.

Industry representatives also raised concerns about the impact of global geopolitical uncertainties on their operations and requested continued support from the government, regulators, and banks.

The meeting concluded with RBI officials assuring that the feedback and suggestions from the industry would be carefully examined by the concerned authorities.