In a meeting with senior management of major banks on Monday, Reserve Bank of India (RBI) deputy governor Swaminathan J emphasised that lenders should adopt a more empathetic approach towards micro, small, and medium enterprises (MSMEs) facing financial distress.

       Additionally, he highlighted the need for digital solutions, alternative credit assessment models, and greater participation in platforms like TReDS by lenders to mitigate the funding challenges the MSME sector is facing.

       Swaminathan was speaking at the 29th meeting of the standing advisory committee (SAC) in Ahmedabad to review the flow of credit to the MSME sector.

       In his address, Swaminathan highlighted numerous challenges facing the MSME sector, including delayed payments, information asymmetry, and financial literacy gaps.

       He said there is a need for digital solutions, alternative credit assessment models, and greater participation in platforms like TReDS to mitigate these challenges. He also highlighted that RBI is taking steps to strengthen institutional credit support to the MSME sector through initiatives such as the Unified Lending Interface (ULI), the Account Aggregator framework, and the Regulatory Sandbox.

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       As per the latest data, under ULI—RBI’s UPI-like digital public infrastructure in the lending space—around 160,000 loans amounting to Rs 14,500 crore have been disbursed to MSMEs.

       “During the meeting, the SAC reviewed the flow of credit to MSMEs and deliberated on ways to address 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 proactive revival and rehabilitation of MSMEs in financial distress, among others,” RBI said in a statement on Monday.

       Apart from senior bankers from major banks, the meeting was attended by RBI’s executive director, senior officials from the Ministry of MSME and the Department of Financial Services, Ministry of Finance. Additionally, senior executives from the Indian Banks’ Association (IBA), Finance Industry Development Council (FIDC), and MSME associations, along with the chairman of the Small Industries Development Bank of India (SIDBI), also participated.

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