RBI Governor: MSMEs vital, RBI committed to financial inclusion
Reserve Bank of India Governor Shaktikanta Das emphasized the vital role of Micro, Small, and Medium Enterprises (MSMEs) in India's economy during the inauguration of International MSME Day celebrations in Kochi. He highlighted RBI's commitment to fostering financial inclusion and growth for the sector through various policy initiatives.
MSMEs: India's economic backbone
Reserve Bank of India Governor Shaktikanta Das underscored the critical importance of Micro, Small, and Medium Enterprises (MSMEs) to both the global and Indian economies.
Globally, MSMEs constitute 90 percent of businesses and contribute 50 percent of total employment.
In India, the sector accounts for 31 percent of GDP, approximately 35 percent of manufacturing output, and nearly half of merchandise exports, supporting over 32 crore livelihoods.
The Governor emphasized that the RBI views MSMEs as central to achieving 'Viksit Bharat,' believing that a financial system must effectively serve its smallest participants to truly benefit the economy.
He highlighted the sector as a vital nursery for entrepreneurship across every district and state.
RBI's eight-point financial support agenda
The Reserve Bank of India has implemented several key regulatory measures to enhance MSME access to finance.
These include classifying all MSME loans under Priority Sector Lending, with a dedicated sub-target for micro enterprises.
The limit for collateral-free loans to MSMEs was recently doubled from ₹10 lakh to ₹20 lakh, extendable to ₹25 lakh for strong performers.
The RBI also expanded guarantee cover through the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), reducing bank risk perception and providing capital incentives.
Initiatives like the Trade Receivables Discounting System (TReDS) and the Account Aggregator framework (facilitating ₹3.5 lakh crore in lending in FY 2025-26) aim to smoothen credit flow.
Additionally, prepayment charges on floating-rate loans to MSEs were prohibited.
Bridging the credit gap, building trust
Despite a remaining credit gap, the RBI notes substantial progress in MSME financing, with sector credit growing 15 percent annually over five years.
The Unified Lending Interface (ULI) is set to revolutionize credit access by digitalizing borrower assessment, akin to UPI's impact on payments.
Success hinges on financial institutions investing in digital infrastructure and MSMEs embracing technology and financial discipline for a truly inclusive ecosystem.