Proper data integration required to boost MSME lending, say bankers

Bankers highlighted the need for consent-based APIs and structured data to improve MSME lending, addressing working capital, technology, and credit guarantee challenges

To enhance lending to micro, small and medium enterprises (MSMEs), proper data integration is required, bankers said, stressing the need for a consent-based application programming interface (API) where income tax data can be accessed and directly used in credit models.

 

“Right now, getting information is done manually by different banks and NBFCs (non-banking financial companies). Gradually, we have to integrate API information and other transactional data outside the banking account space into this seamless journey. Once that happens, we will be better placed to move to the next phase of the business,” said Ashwini Tewari, managing director, State Bank of India.

 

MSMEs often face working capital challenges as their customers — typically large industries — do not make timely payments, leading to longer cash cycles. This raises credit costs and renders many units unviable. Technology adoption and upskilling are additional hurdles that MSMEs alone cannot address, bankers said, urging the government to create proper systems for training so entrepreneurs are equipped with the latest technologies. 

 

High power costs in several states also affect the sector’s sustainability. Further, the absence of structured data for micro units continues to hamper lending.

 

“Many of them have very good credit records with local lenders, but these are undocumented. We need to develop assessments based on unstructured data,” said Partha Pratim Sengupta, managing director and chief executive officer, Bandhan Bank.

 

He also stressed the importance of consent-based credit. “When we are taking risks, defaults are bound to happen. We should have a proper guarantee scheme,” he said, adding that such a scheme must be simple and straightforward to implement.

 

Currently, there are around seven crore MSMEs in India, but only about 30 lakh receive loans annually, said Manoj Mittal, chairman and managing director, SIDBI. He added that efforts are underway to scale lending and productivity through the Udyam Assist portal.

 

The portal lists about 2.76 crore informal micro enterprises, most of which are below the Goods and Services Tax threshold, Mittal noted.