With MSMEs driving employment and economic growth, the government faces significant expectations to deliver transformative reforms.
Shachindra Nath, CEO of UGRO Capital, highlighted the pressing need for enhanced liquidity support for NBFCs serving the priority sector. He remarked, “MSME credit needs to expand, and that aligns with the government’s objectives. However, liquidity for NBFCs focused on this sector remains minimal. Mechanisms like guarantee schemes or a dedicated refinancing institution can help. Achieving the mission of tripling MSME financing is possible only if NBFCs receive adequate liquidity support.”
Alok Mittal, Executive Chairman of Indifi, underscored the adverse impact of last year’s changes in risk weights for unsecured lending. He suggested, “To ensure better capital flow to underserved MSMEs, public sector banks should lower their co-lending criteria for NBFCs to include those rated BBB. This would allow innovative NBFCs and fintechs, which currently fall outside the scope of partnerships limited to A-rated NBFCs, to contribute effectively. Public sector banks still retain full credit control, ensuring risk management.”
Bhavik Vasa, Founder of Getvantage Capital, stressed the need for technology-driven credit distribution and affordable financing rates. “The earmarked corpus must reach MSMEs through digital channels, as traditional financial institutions have struggled to deliver. Adopting fintech solutions can accelerate this process. Additionally, affordable and subsidised rates are crucial to boost MSME financing, drive consumption, and stimulate economic demand,” he said.
The collective message from the industry is clear: timely credit access, reduced costs, and greater collaboration between banks and innovative NBFCs are essential for realising the government’s MSME growth vision. The Union Budget has a vital opportunity to unlock the full potential of MSMEs through initiatives like guarantee schemes, subsidised rates, and tech-enabled frameworks. Striking a balance between intent and execution will be key to driving sustainable growth in this crucial sector.
