RBI Deputy Governor Urges Financial Institutions To Be Empathetic For MSME Needs

Mumbai, Aug 23 (KNN) In a significant move to bolster the micro, small and medium enterprises (MSMEs) sector, Reserve Bank of India (RBI) Deputy Governor Swaminathan J has called on financial institutions to implement supportive measures for these businesses.

Speaking at the annual day of the Foreign Exchange Dealers' Association of India (FEDAI) on Thursday, Swaminathan emphasised the need for a more empathetic approach towards MSMEs, given their crucial role in the economy.

The deputy governor outlined several key initiatives that financial institutions should consider. These include restructuring options, grace periods, and tailored repayment plans. These measures are aimed at helping MSMEs recover and regain stability during challenging times.

Swaminathan stressed the importance of a nuanced approach to assessment and follow-up, taking into account the unique challenges faced by MSMEs. These challenges include low capital base, lack of scale, cash flow constraints from delayed payments, fluctuating market conditions, and external economic pressures.

The RBI's stance aligns with the government's recent efforts to encourage banks to provide collateral-free loans to small businesses and offer additional financial support during periods of economic stress.

Swaminathan highlighted several issues plaguing the MSME sector, including limited access to affordable finance, delays in receiving payments, infrastructure bottlenecks, and high compliance costs.

He noted that the increasing adoption of digital payment systems, mobile banking, and online accounting tools by MSMEs could lead to better risk assessment and the development of customized financing products.

The deputy governor also mentioned RBI initiatives to promote innovation in MSME financing, such as the Trade Receivables Discounting System (TReDS) launched in 2014.

While there has been an uptick in transactions, Swaminathan emphasised the need for greater participation from corporate buyers and MSME sellers to fully realize the platform's potential.

In conclusion, Swaminathan called on the financial sector to play a vital role in providing capacity-building programs for MSMEs and supporting their export efforts through targeted services and risk management solutions.

This push for greater support of the MSME sector underscores the RBI's commitment to fostering a more resilient and dynamic small business ecosystem in India.

(KNN Bureau)