The MSME Ministry on Thursday urged financial institutions to improve on providing faster, cheaper and timely credit to micro, small and medium enterprises. Speaking at the FE Inclusive Conclave 2025, focusing on financial inclusion, Joint Secretary in the ministry Ateesh Singh called for improving the credit assessment system and leveraging technology to boost the lending process.
“In the MSME ecosystem, what is needed is cheaper credit, faster credit and timely credit. That really is the mantra. So how do we improve on what we have? We should look at the credit process itself and how can we make it smarter and seamless and come up with zero defects and rejections,” said Singh.
Moreover, how we can better the system of KYC and credit assessment is also important, he added.
The joint secretary also called for “looking at AI for fraud detection, customer experience, underwriting and more areas. It is for us to take advantage of it. Technology innovation will play a key role in improving the lending process among banks.”
Importantly, the government and the central bank Reserve Bank of India (RBI) have been promoting the use of cash flow-based lending instead of collateral-based to boost formal lending to MSMEs by evaluating GST returns, digital payment data, and revenue streams. Banks and NBFCs are able to leverage transaction records for real-time underwriting and faster loan disbursals.
Further, the Open Credit Enablement Network (OCEN) also improves digital lending for MSMEs by connecting them with various lenders based on their cash flow visibility, boosting liquidity and financial inclusion for businesses.
“Inclusive finance or financial inclusion is a key driver to unlock full potential of MSMEs in terms of production, employment, sustainability, etc. The government has a key role of facilitator and protector of MSMEs with schemes and measures to support them and provide a level playing field along with promoting innovation and bringing correct regulations to different facets,” said Singh.
