For loans up to ₹25 lakh for Micro and Small Enterprises (MSE) borrowers, credit decisions within 14 working days by the banks

The Reserve Bank of India (RBI), as a regulator, provides an enabling framework for Regulated Entities (REs) to cater to the financing needs of various sectors of the economy within the prudential boundaries. Further, credit related matters of REs are largely deregulated and the same are governed by the Board approved loan policies of the REs framed under the ambit of relevant regulatory and statutory requirements and terms and conditions of the loan agreement between the borrower and the RE. Banks have been advised to furnish the MSME borrowers with an indicative checklist of documents required for processing the loan application at the time of applying for the loan. For loans up to ₹25 lakh to units in the Micro and Small Enterprises (MSE) borrowers, banks are advised that the timelines for credit decisions shall not be more than 14 working days. Various measures have been taken for increasing access to credit and finance for MSMEs.

These include:

• Specific targets for lending to MSME sector have been prescribed in Priority Sector guidelines dated 4.9.2020.
• SCBs have been mandated not to accept collateral security in the case of loans up to ₹10 lakh extended to units in the MSE sector.
• Computation of working capital requirements of MSE units to be minimum 20% of the projected annual turnover for borrowal limits up to ₹5 crore.
• Trade Receivables Discounting System (TReDS) has been operationalized to address the problem of delayed payments to MSMEs.
• Banks have been advised to link interest rates of loans extended to MSMEs to an external benchmark.
• RBI’s Account Aggregator (AA) framework and proposed Third Cohort under Regulatory Sandbox (RS) for MSME Lending is expected to spur innovations that can fill the lending gap for MSMEs through the use of technology and data analytics.
• RBI’s Unified Lending Interface (ULI) will make credit more accessible to underserved populations.
• GST Sahay App of SIDBI facilitates ‘on tap’ invoice-based (cash flow based) small value credit to micro enterprises as a paperless journey.
• Udyam Assist Platform (UAP) to register Informal Micro Enterprises (IMEs) i.e. micro enterprises not registered under the GST regime.
• Under Pradhan Mantri Mudra Yojna (PMMY), Government has taken various steps towards effective implementation of the Scheme. These include publicity campaigns, simplification of application form, Credit Guarantee Scheme, nomination of Mudra Nodal Officer, frequent reviews at various levels to monitor the achievement against allocated target, etc. Online platforms like Jansamarth portal provide a quick and efficient way to get loans for individuals and businesses, with approvals based on digital evaluation of the applicant's data.
• PSBLoansin59minutes enables MSMEs to obtain In-principle approval of loans from lenders onboarded on the platform.
• SAMADHAAN Portal launched for monitoring of outstanding dues to the MSEs from the buyers of goods and services xiii. The Government of India has launched various Credit Guarantee schemes for the benefit of MSMEs.
• New Credit Assessment Model based on the scoring of digital footprints of MSMEs developed by PSBs will leverage the digitally fetched and verifiable data available in the ecosystem and devise automated journeys for MSME Loan appraisal using objective decisioning for all loan applications and model-based limit assessment for MSME borrowers.

This information was given by Minister of State in the Ministry of Finance, Shri Pankaj Chaudhary in a written reply to a question in Rajya Sabha.

Timely credit decisions for small enterprises-short decision timelines and digital, paperless lending to expand MSME finance. Banks must furnish an indicative document checklist to MSE applicants and decide credit applications for small MSE loans within specified short timelines, guided by Board approved loan policies and prudential rules. The framework combines priority sector targets, collateral exemptions for small advances, simplified working capital computation and external benchmark linked pricing to expand access. Digital and market infrastructures - TReDS, account aggregators, unified lending interfaces, GST Sahay, Udyam Assist, digital credit scoring and online approval platforms - support automated, paperless loan appraisal, onboarding of informal micro enterprises and monitoring of outstanding dues, backed by credit guarantee schemes.