RBI DG urges lenders to focus on credit delivery to MSMEs

Mumbai, Apr 3 (KNN) Indian lenders need to focus on the delivery of credit to micro, small and medium enterprises (MSMEs) said, RBI Deputy Governor M Rajeshwar Rao owing to the consistent gap between demand and supply of credit to MSMEs.

The sector contributes around 30 per cent to India's GDP, 45 per cent to its manufacturing output, and 48 per cent to exports, he said while speaking at the Thrissur Management Association.

"This has to be seen as an area of opportunity by the banks and other financial institutions," Rao said.

He highlighted the central bank's responsibility to promote sustainable economic growth, which includes the transition to a low-carbon economy.

The banks can play an essential role by developing new financial products that incentivise green projects, he added.

"As a central bank, we also have a responsibility to promote sustainable economic growth, which includes transition to a low-carbon economy," Rao said, adding, "Banks can play an essential role in financing the transition to a low-carbon economy by channelising finance to sustainable and green projects as well as by developing new financial products that incentivise green initiatives."

Speaking on digital lending, he said banks are now tying up with fintechs for their technological prowess to provide better products and better serve their customers.

"In the post-pandemic world, while digital lending has picked up enormously in various ways, it has also given rise to a host of business conduct issues," Rao said.

"This poses a regulatory dilemma as the regulator then needs to play a balancing act in weighing the benefits brought in by innovative business models on one side and emerging business conduct and regulatory concerns on the other side," he said.

"An attempt has been made by the RBI to address this issue through issuing principle-based guidelines on digital lending," he said.  (KNN Bureau)