RBI mulls ways to improve access to credit for MSME sector

As the Reserve Bank of India (RBI) tries to focus on ways to improve access to credit for the MSME sector, Deputy Governor Michael Patra believes this year will be the year of MSMEs for the RBI . The central bank is working with banks to improve access to existing credit for MSMEs and also reduce the cost of credit. The central bank plans to launch a portal, which will be monitored by the RBI, to ensure easy access to credit for MSMEs, he said.

“Out of the 6 or 7 things we take as deliverables for this year, I think this year will be the year of RBI MSMEs. We are already working with banks to ease the credit cycle and improve access to credit for MSMEs. We can think of different exemptions for MSMEs,” he said.

The RBI announced the Emergency Line of Credit Guarantee Scheme (ECLGS) in 2020, which has led to an increase in the demand for loans. The program is extended until March 2023. On an annual basis, outstanding credit to MSMEs by banks increased by 13.4% in March 2022, against 10.6% a year ago, according to the report RBI’s annual report for FY22.

The central bank is also in talks with large companies and various ministries to improve payment cycles to MSMEs, as these companies are not being paid on time. For these small businesses, payments not arriving on time are always a problem, Patra said.