RBI Highlights USD 1.955 Trillion Funding Gap for Indian MSMEs

New Delhi, Sep 4 (KNN) Reserve Bank of India (RBI) Deputy Governor Michael Debabrata Patra revealed on Tuesday that Micro, Small, and Medium Enterprises (MSMEs) in India have a total finance demand of approximately USD 1.955 trillion.

Speaking at the 'Financing 3.0 Summit: Preparing for Viksit Bharat' organised by the Confederation of Indian Industry (CII), Patra emphasised the critical role of MSMEs in India's economic landscape.

According to Patra, the MSME sector contributes significantly to the Indian economy, accounting for about 30 per cent of the country's GDP, 45 per cent of exports, and 62 per cent of employment in the business sector. The sector is expected to expand in the coming years, further underlining its importance.

Of the total finance demand, USD 1.544 trillion is debt-based. However, Patra noted that half of this demand comes from borrowers who either prefer informal financing sources or represent financially unviable enterprises.

This leaves a viable debt demand of USD 819 billion, of which USD 289 billion is currently met by formal credit lenders such as banks.

The remaining USD 530 billion represents a substantial opportunity for banks, fintech companies, and non-banking financial companies (NBFCs).

Patra also highlighted India's rapid digital transformation, particularly in the banking sector.

He pointed to the proliferation of digital banking platforms, mobile banking applications, and online services as key factors in reducing cash dependency and promoting financial inclusion.

The deputy governor praised the success of the Unified Payments Interface (UPI), describing it as a ‘game-changer’ and one of the fastest-growing digital payment platforms globally.

Looking ahead, Patra mentioned the potential of the central bank digital currency (CBDC) project, known as e₹, to revolutionise both the payments landscape and the broader financial system.

He also noted the emergence of Digital Supply Chain Finance (DSCF) as a promising segment that aims to integrate digital financial services into supply chains, potentially enhancing efficiency and reducing risks.

The RBI deputy governor's remarks underscore the significant role of MSMEs in India's economic growth and the vast opportunities present in financing this sector, particularly through digital means.

(KNN Bureau)