Measures like IBC, market-based stressed asset transfer, and EASE reforms drive  NPA recovery and promote responsible lending

Initiatives implemented to improve credit flow to Micro, Small and Medium Enterprises (MSMEs)

UPI transactions grow from 92 crore in FY 2017-18 to 18,587 crore in FY 2024-25, with a CAGR of 114%

The Government has taken various measures over the last few years to address the issues related to credit discipline, responsible lending, improved governance, adoption of technology, and proper regulation of Co-operative banks have been taken by the Government / Reserve Bank of India (RBI.)

These include, inter alia, the following:

(i) Credit discipline has been instilled through—

1. enactment of the Insolvency and Bankruptcy Code (IBC);
2. setting up of the Central Repository of Information on Large Credits (CRILC) by RBI to monitor corporate loans and systematic checking of high-value accounts for wilful default and fraud.

(ii) Recognition and resolution of stressed Assets - To protect financial institutions in case of default/delay in payment by large borrowers, multiple steps have been taken viz.:

1. putting in place a framework for early recognition and time-bound resolution of stress.
2. automated Early Warning Systems to detect and reduce slippage of accounts into NPAs using third-party data and workflow for time-bound remedial actions.
3. strengthening Market based mechanisms to better manage the credit risk on the balance sheets through a comprehensive framework for transfer of stressed assets to eligible transferees.
4. National Asset Reconstruction Company Limited (NARCL) has been set up to consolidate and takeover stressed debt, fragmented across various lenders and thereafter manage and dispose it off to buyers for better realisation.

(iii) Governance Reforms in PSBs have been carried out through reforms like arms length selection of top management through Financial Services Institutions Bureau, introduction of Non-Executive chairmen in Nationalised Banks, widening talent pool and instituting performance-based extension for Managing Directors.

(iv) Enhanced Access & Service Excellence (EASE) reforms have enabled objective and benchmarked progress on all key areas in PSBs such as governance, prudential lending, risk management, technology- and data-driven banking, and outcome-centric HR.

(v) Amalgamation of PSBs has led to economies of scale, increase financial capacity, technology adoption and overall efficiency enhancement.

(vi) Massive Technology adoption in banking has been instrumental in expanding financial inclusion, improving efficiency, and enabling real-time service delivery. Digital payment transactions have grown phenomenally as a result of various initiatives viz., Jan-Dhan–Aadhaar–Mobile (JAM) linkage, interoperable Bank Mitras, Unified Payments Interface (UPI) and Direct Benefit Transfers (DBTs).

(vii) The Banking Regulation (Amendment) Act, 2020 was brought in to enhance the governance, financial stability, and regulatory oversight of co-operative banks, which serve millions of citizens, particularly in rural and semi-urban areas.

(viii) The Banking Laws (Amendment) Act, 2025 has been notified to enhance governance standards, strengthen protection for depositors and investors, improve audit quality in PSBs, shift statutory reporting by banks to the RBI and streamline nomination processes for customer convenience.

MSME Measures

The measures implemented to improve credit flow to Micro, Small and Medium Enterprises (MSMEs) and achievements are as under:

1. Mutual Credit Guarantee Scheme for MSMEs (MCGS-MSME)- It is a government-backed initiative designed to help MSMEs access loans to grow their businesses. This scheme offers credit guarantee, making it easier for MSMEs to obtain loans, especially for purchasing essential equipment and machinery. The Scheme provides credit guarantee cover to lenders (Scheduled Commercial Banks, All India Financial Institutions, NBFCs) for their term loans up to Rs. 100 crore to MSMEs for their projects involving purchase of equipment/machinery. The Scheme has been launched recently and is valid till issue of guarantees on loans cumulating to Rs. 7 lakh crore or 4 years from the date of issue of guidelines (i.e. 27.1.2025), whichever is earlier.
2. Emergency Credit Line Guarantee Scheme (ECLGS) - ECLGS provided 100% guarantee cover to Member lending Institutions (MLIs) in respect to the credit facility extended by them to eligible borrowers, including MSMEs and business enterprises for helping them meet their operational liabilities and restarting their businesses. The Scheme was valid till 31.3.2023 and provided liquidity support of Rs. 3.68 lakh crore to 1.19 crore businesses, of which loans amounting to Rs. 2.42 lakh crore have been sanctioned to 1.13 crore MSMEs under ECLGS.
3. Subsequent to Union Budget 2024-25 announcement, the Union Finance Minister had launched New Credit Assessment Model for MSMEs on 06.03.2025. The model leverages the digitally fetched and verifiable data and devises automated journeys for MSME loan appraisal using objective decisioning for all loan applications and model-based limit assessment for both Existing to Bank (ETB) as well as New to Bank (NTB) MSME borrowers.
4. Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), under the administrative purview of Ministry of MSME, provides guarantee cover up to 85%, for loans amounting to Rs. 10 crore or below, extended by eligible Member Lending Institution (MLIs) to Micro and Small Enterprises (MSEs). The annual guarantee fee has been reduced which ranges from 0.37% to 1.20%. As on 31.07.2025, CGTMSE has approved 1.22 crore number of cumulative guarantees worth Rs. 10.50 lakh crore.

Digital Payments

The total volume of digital payment transactions in the country has increased from 2,071 crore in FY 2017-18 to 22,831 crore in FY 2024-25, growing at a CAGR of 41%. During the same period, the value of transactions has grown from Rs. 1,962 lakh crore to Rs. 3,509 lakh crore.

Further, the total monthly volume of digital payment has increased from 1,739 crore in June 2024 to 2,099 crore in June 2025. During the same period the value of transactions has increased from Rs. 244 lakh crore in June 2024 to Rs. 264 lakh crore in June 2025.

UPI transactions, in particular, have grown from 92 crore in FY 2017-18 to 18,587 crore in FY 2024-25, with a CAGR of 114%. During the same period, the value of transactions has grown from Rs. 1.10 lakh crore to Rs. 261 lakh crore.

In July 2025, UPI reached another milestone recording over 1,946.79 crore transactions in a single month for the first time.

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

Credit discipline reforms strengthen bank governance, stressed asset resolution and MSME credit access through regulatory measures. Reforms strengthen credit discipline via statutory and supervisory tools, including the Insolvency and Bankruptcy Code, a central repository for large credits, automated Early Warning Systems, and market based transfer mechanisms for stressed assets supported by a National Asset Reconstruction Company; governance, EASE benchmarking, PSB amalgamations and technology adoption complement these measures, while MSME credit access is enhanced through government guarantee schemes and a new digital credit assessment model and banking law amendments aim to raise governance and depositor protections.