New Delhi – In a major push to strengthen the Micro, Small, and Medium Enterprises (MSME) sector, the Government of India has introduced several measures aimed at improving credit access and financing. One of the key changes includes a directive for banks to make credit decisions within 14 working days for loans up to ₹25 lakh for Micro and Small Enterprises (MSE) borrowers. This move is expected to provide faster financial support to businesses and enhance their growth prospects.
The Reserve Bank of India (RBI) has also established a regulatory framework that allows Regulated Entities (REs) to meet the financing needs of different economic sectors while maintaining prudential norms. With credit-related matters largely deregulated, banks and financial institutions are now guided by board-approved loan policies, statutory requirements, and agreements with borrowers. To ensure transparency, banks must nowprovide MSME borrowers with a checklist of required documents at the time of loan application.
To further aid MSMEs, several government initiatives have been rolled out. Under Priority Sector Lending guidelines, specific lending targets have been set to channel more funds into the MSME sector. Additionally, Scheduled Commercial Banks (SCBs) are barred from demanding collateral for loans up to ₹10 lakh, making financing more accessible for small businesses. For enterprises with borrowing limits up to ₹5 crore, working capital requirements are now calculated at a minimum of 20% of their projected annual turnover.
A key measure to address delayed payments to MSMEs is the implementation of the Trade Receivables Discounting System (TReDS). This initiative aims to expedite payments and improve liquidity for small businesses. Meanwhile, interest rates for MSME loans have been linked to external benchmarks, ensuring fairer lending rates for businesses.
Technological advancements are also being leveraged to boost MSME financing. RBI’s Account Aggregator (AA) framework and the Third Cohort under the Regulatory Sandbox (RS) for MSME lending are expected to bridge lending gaps using technology and data analytics. The Unified Lending Interface (ULI) by RBI aims to make credit more accessible to underserved businesses, while SIDBI’s GST Sahay app enables paperless, invoice-based small-value credit for micro enterprises.
Other key initiatives include the Udyam Assist Platform (UAP) for registering informal micro enterprises outside the GST regime and the Pradhan Mantri Mudra Yojana (PMMY), which has undergone process improvements such as simplified application forms, credit guarantees, and better monitoring of loan disbursements.
To further simplify access to loans, the government has introduced digital platforms like the Jansamarth portal, which facilitates quick approvals based on digital data analysis. Similarly, the PSBLoansin59minutes platform allows MSMEs to receive in-principle loan approvals in less than an hour. To address delayed payments, the SAMADHAAN portal has been launched to monitor and resolve outstanding dues to MSEs.
Additionally, various credit guarantee schemes have been introduced to support MSMEs, while Public Sector Banks (PSBs) have developed a new credit assessment model. This model uses verifiable digital data to automate loan appraisal and decision-making, ensuring faster and more objective credit evaluation.
These wide-ranging reforms reaffirm the government’s commitment to strengthening the MSME sector by ensuring timely access to credit, reducing bureaucratic hurdles, and leveraging technology to enhance financial inclusion. These measures are expected to drive economic growth, boost employment, and empower small businesses across the country.