SME Chamber of India urges credit reforms, permanent RBI advisory body

SME Chamber of India has called for easier MSME loans, waivers of fees and guarantees, and a permanent RBI Standing Advisory Committee to resolve financing challenges

The Small & Medium Business Development Chamber of India (SME Chamber of India) has called for urgent reforms to improve credit access for micro, small and medium enterprises (MSMEs), recommending easier and more affordable loans, waiver of processing fees, uniform application formats across banks, and greater interaction between senior bank officials and entrepreneurs.

 

It has also appealed for the creation of a permanent Standing Advisory Committee under the Reserve Bank of India (RBI) to regularly review and resolve the sector’s financial challenges.

 

In a detailed memorandum submitted to M Nagaraju, secretary, department of financial services (DFS), ministry of finance, the Chamber said MSMEs continue to face severe credit bottlenecks despite being a key driver of India’s industrial growth, exports and employment. It observed that micro enterprises take up to 10 years to scale into small units, while small and medium enterprises also struggle for years to graduate further, largely due to high-interest costs, limited financial support, and poor responsiveness from banks.

 

The Chamber recommended that banks finance up to 90 per cent of project costs for new units, allow portability of accounts and loans across banks, and set up MSME helpdesks both at branches and online. It urged that personal guarantees be waived for loans under the CGTMSE scheme, stock statement submissions be eased for loans up to ~5 crore, and banks issue rejection letters with valid reasons to help entrepreneurs reapply in compliance with norms.

 

It also pressed for waivers of prepayment penalties and processing fees for loans up to ~10 crore, affordable credit for branding and international marketing, and one-time settlement schemes with longer moratoriums for stressed enterprises.

 

In a separate representation to RBI Governor Sanjay Malhotra, the Chamber raised concerns over the current system of bi-annual Standing Advisory Committee meetings chaired by the Deputy Governor (Banking Services). It noted that the meetings, attended by a rotating set of bankers, government officials and industry associations, often fail to address grievances or implement past recommendations, as members change frequently and continuity is lost.

 

To address this gap, the Chamber has proposed the constitution of an official Standing Advisory Committee to review credit flow towards the MSME sector with fixed three-year tenure. It recommended that all financial institutions be represented as members, with an Executive Director of RBI serving as Member Secretary, and the Indian Banks’ Association (IBA) acting as nodal coordinator to ensure follow-through on decisions.

 

It also suggested that leading national and state-level MSME associations registered under Section 8 of the Companies Act be made permanent members, accountable for pushing implementation, and that the RBI Governor chair an annual review meeting.

 

Chandrakant Salunkhe, president of SME Chamber of India and Federation of Indian SME Associations (FISA), said these measures are crucial to empower MSMEs, accelerate industrial growth in Tier-2 and Tier-3 cities, and strengthen India’s march towards Viksit Bharat.

 

“Without a structured and accountable framework for policy implementation and regular review, the sector’s concerns remain unresolved. A permanent Standing Advisory Committee will bring the necessary continuity, focus and accountability,” he said.