India needs to bring 80 per cent of its micro, small, and medium enterprises (MSMEs) under the formal financial system from the existing 40 per cent, said M Nagaraju, secretary, Department of Financial Services.
Speaking at FIBAC 2024 in Mumbai, the secretary said, “...A little bit more than 40 million MSMEs registered, still only 40 per cent of them are in the formal financial system and imagine if we are able to step up that to 70 per cent or 80 per cent... Globally, we are all aware small SME groups actually have a very high presence not only domestically in their economy but also internationally. We need to do that.”
Nagaraju said that banks and financial institutions have a vital role in fostering economic growth and development by offering capital and financial services at affordable rates and empowering businesses and individuals to thrive. Banks have an undisputable responsibility in advancing the agenda of inclusive growth, which is fundamental to the economic and social development of the country. Banks are contributing by extending their services to underserved and marginalised communities, supporting MSMEs, advancing renewable energy projects, and others.
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During the Union Budget FY25, the Finance Minister formulated a special package that covers financing, regulatory changes, and technology support for MSMEs to help them grow and compete globally.
The Reserve Bank of India (RBI) Governor Shaktikanta Das also said during the FIBAC event that the financial sector may play a significant role in supporting MSMEs, whereby banks and financial institutions may develop tailored financial products and services that cater specifically to the needs of the sector. These products can propel MSMEs to expand, enhance their productivity, and contribute more significantly to job creation.
Further, Nagaraju also specified that digital infrastructure is the backbone of society, and the Indian banking system needs to leverage the fintech potential available in the country to reach out to the last member of society while being careful of the cyber threats in the system. He also spoke about the need for green financing and promoting better infrastructure projects in the country. The infrastructure needs in the country are going to multiply, and those of the past are ageing, he said.