RBI Measures to Boost MSME Credit Access

New Delhi, Jul 28 (PTI) A delegation from industry lobby PHDCCI met RBI Governor Sanjay Malhotra and suggested a set of policy reforms aimed at enhancing credit access, regulatory support, and financial efficiency for India's Micro, Small, and Medium Enterprises (MSMEs).

The meeting was held last Friday at the RBI headquarters in Mumbai.

"The chamber appreciated the Union Government's move to expand credit guarantee schemes and urged the RBI to ensure effective implementation. To that end, it was suggested that RBI should create designated help desks at field offices level to support MSMEs facing credit access challenges," PHDCCI said.

A key recommendation included streamlining and rolling out the proposed Micro Credit Facility Cards, announced in the Union Budget, with a Rs 5 lakh limit each.

PHDCCI proposed renaming them to distinguish from consumer credit cards, standardizing issuance procedures, ensuring interest rate caps, and launching a centralised portal for monitoring card applications.

The industry lobby also stressed upon the need to digitise and standardise banking documentation across institutions to reduce physical paperwork and promote transparency.

In a push for inclusive financing, PHDCCI advocated for removing the current Rs 20 lakh cap on Priority Sector Lending classification for credit through NBFCs, requesting an increase to at least Rs 1 crore to support working capital needs in line with revised MSME definitions.

Besides the above recommendations, some key points were also discussed in the meeting including extension and expansion of the Interest Equalization Scheme to cover service exporters, aligning with India's ambitious USD 1 trillion export target.

The chamber also pitched for faster clearance of deposited cheques, suggesting a 24-48 hour credit window to ease cash flow for MSMEs; and sought regulatory intervention against "unfair practices by credit rating agencies, particularly those demanding advance fees and NOCs for rating withdrawal".

It also called upon the RBI for revision of NPA classification norms, recommending an extension of the overdue threshold from 90 to 180 days to reflect realistic MSME working capital cycles.