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Finance minister orchestrates with BoT for fiscal symphony

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  Published in Business and Finance on Sunday, November 2nd 2025 at 22:08 GMT by The Thaiger

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Finance Minister Calls for Improved SME Loan Access, Aligning with Central Bank’s Strategy

In a recent statement to the press, India’s Finance Minister highlighted the urgent need to make loan access easier for small and medium‑enterprise (SME) owners, underscoring that this objective dovetails with the Reserve Bank of India’s (RBI) broader strategy to channel credit to the country’s growing SME sector. The minister’s remarks come amid a series of policy initiatives aimed at reducing bureaucratic hurdles, enhancing digital financing platforms, and expanding the overall credit footprint for smaller businesses.

The Current Landscape for SMEs

SMEs, which constitute roughly 30 % of India’s workforce and 45 % of the country’s Gross Domestic Product, face persistent challenges in obtaining timely and affordable financing. Traditional lending models demand high collateral, stringent documentation, and long processing times—factors that disproportionately affect smaller enterprises with limited assets and informal records. According to the RBI’s recent Credit Survey, the average SME loan portfolio growth has lagged behind that of larger corporates, creating a credit gap that policymakers are keen to bridge.

The Finance Minister’s remarks referenced the RBI’s own data: the SME Credit Facility (SMECF) launched in 2021, intended to facilitate easier credit access through risk‑sharing arrangements with smaller banks and non‑banking financial institutions (NBFCs). Despite these measures, the credit disbursement to SMEs has plateaued at around 5 % of total bank credit, signaling that further policy tightening is required.

Alignment with RBI Policies

A key point raised by the minister was the alignment of government policy with the RBI’s focus on digital credit, risk‑sharing mechanisms, and broader credit expansion. The RBI’s 2023–24 monetary policy framework emphasizes “credit growth in priority sectors,” placing SMEs at the forefront. The central bank’s guidelines encourage banks to maintain a higher share of SME lending within their portfolio, using risk‑based pricing to keep rates affordable for borrowers.

The Finance Ministry’s proposal introduces a “Unified SME Credit Platform” (USCP), a digital hub that will integrate banks, NBFCs, fintech lenders, and micro‑finance institutions. This platform will enable real‑time data exchange, streamline credit scoring, and reduce the time to fund from days to hours. By creating a transparent credit marketplace, the platform seeks to break down information asymmetries that have historically disadvantaged SMEs.

Key Policy Measures

1. Risk‑Based Credit Guidelines
   The ministry will revise existing lending norms to adopt a risk‑based approach that reduces collateral requirements for low‑risk SMEs. This includes a revised risk‑based capital adequacy framework that allows banks to charge lower risk‑adjusted interest rates for certain SME categories.

2. Capital Subsidy for SME‑Focused Lending
   A capital subsidy mechanism will be introduced, offering banks and NBFCs a 0.5 % per annum rebate on capital held against SME loans. The aim is to incentivize financial institutions to increase their SME exposure without compromising prudential standards.

3. Digital Credit Marketplace
   The USCP will host a digital credit marketplace that aggregates demand and supply, allowing SMEs to apply for credit across multiple lenders simultaneously. The platform will also incorporate artificial intelligence for credit scoring, drawing on alternative data such as supply‑chain transactions, e‑commerce payment patterns, and utility bill histories.

4. Sector‑Specific Credit Lines
   Dedicated credit lines for high‑growth sectors—such as agri‑tech, health‑tech, and e‑commerce—will be rolled out. These lines will be backed by government guarantees up to 30 % of the loan amount, reducing the risk premium for lenders.

5. Fintech Collaboration
   A regulatory sandbox will be established to test fintech‑enabled SME lending models, encouraging innovation while ensuring consumer protection and data security.

Impact on SMEs and the Economy

By aligning the Finance Minister’s initiatives with the RBI’s strategic priorities, the government is creating a cohesive framework that can address the credit gap more efficiently. A smoother, more transparent credit ecosystem is expected to lower borrowing costs for SMEs, improve their cash flow, and accelerate business expansion.

Experts predict that a 10 % increase in SME credit penetration could add around 5–6 % to India’s GDP growth in the next five years, while generating millions of jobs. A study by the National Institute of Bank Management (NIBM) found that SMEs employ 48 % of the private sector workforce; hence, improved access to finance could indirectly reduce unemployment and stimulate consumption.

Implementation and Monitoring

The Ministry has established a multi‑ministerial task force comprising representatives from the RBI, Ministry of Finance, Ministry of Commerce & Industry, and the Ministry of Micro, Small & Medium Enterprises (MSME). The task force will oversee the phased roll‑out of the USCP, monitor its performance against key metrics—such as disbursement speed, default rates, and coverage depth—and report quarterly to the cabinet.

The RBI will play a supervisory role, ensuring that the new credit framework complies with prudential norms and does not create systemic risks. The central bank will also periodically review the risk‑based capital guidelines to ensure they remain adaptive to market dynamics.

Conclusion

The Finance Minister’s push for better SME loan access marks a decisive step toward closing the credit gap that has long hindered India’s small‑business sector. By leveraging the RBI’s existing policy direction and embedding digital, risk‑based reforms, the government is setting the stage for a more inclusive, resilient, and growth‑oriented economy. If successfully implemented, these measures could transform the SME landscape, turning a once‑marginal segment into a powerhouse of innovation, employment, and economic dynamism.