Despite progress, MSMEs still face credit shortages: DG Swaminathan

Despite significant credit penetration in India, there remains considerable scope for reducing credit gaps to enhance economic inclusivity and development. While credit delivery to priority sectors has improved, the credit needs of micro, small, and medium enterprises (MSMEs) are still far from being met, said Swaminathan J, deputy governor of the Reserve Bank of India (RBI) on June 19. The speech was released on the RBI website on Monday. He further said that nearly half of self-help groups (SHGs) have yet to be credit-linked, and a significant portion of small and marginal farmers remain outside the purview of bank credit. Addressing these credit gaps requires a multifaceted approach, with state-level bankers' committees (SLBCs) playing a crucial role.

While speaking at the Conference of Convenors of SLBCs, held at the College of Agricultural Banking (CAB), Pune, the deputy governor said, “Despite significant penetration of credit in India, there is still ample scope for reducing credit gaps that can promote economic inclusivity and development. While credit delivery to the priority sectors has indeed improved, we still have a long way to go to meet the credit needs of the MSMEs. Similarly, nearly half of self-help groups (SHGs) still remain to be credit linked while a considerable section of small and marginal farmers are yet to be covered under bank credit.”

He emphasised that SLBCs should promote the use of fintech solutions to streamline banking operations and enhance customer service. Additionally, SLBCs must foster strong partnerships with various government bodies to align banking initiatives with developmental programmes. This involves collaborating closely with local administrations to extend banking services to underserved regions, facilitating the implementation of government schemes, and addressing region-specific issues through joint efforts.

“SLBCs should promote the use of fintech solutions to streamline banking operations and improve customer service. Technologies such as mobile banking, tech-driven customer support, and digital loan processing have significantly reduced turnaround times and increased accessibility,” he said.

Swaminathan said that SLBCs should conduct detailed analyses to identify the root causes of stagnant credit growth in certain jurisdictions. This involves using data analytics and field surveys to understand regional economic activities, local credit needs, and barriers to credit access. By pinpointing specific issues—whether related to infrastructure, borrower awareness, or banking processes—SLBCs can develop more targeted and effective credit plans. This approach will enhance credit flow and ensure it reaches the sectors and regions that need it most, thereby supporting sustainable economic development.