India pushes MSME credit overhaul with new laws and financing tools
Recent legislation and RBI co-lending rules aim to ease financing for micro, small and medium enterprises, while challenges such as the West Asia crisis linger.
Finance Minister Nirmala Sitharaman urged lenders to adopt cash-flow-based underwriting for MSMEs, a push reinforced by the MSME (Amendment) Act, 2026 and RBI co-lending guidelines effective January 2026. The law introduces a 45-day payment rule and penalties for delayed invoices, while the Trade Receivables Discounting System (TReDS) has facilitated more than ₹8.7 trillion in transactions, expanding participation among public sector enterprises and government bodies.
Industry leaders argue that success hinges on coordinated action among banks, NBFCs, fintechs and credit-guarantee mechanisms to lower capital costs and improve data quality. The sector remains vulnerable to external shocks, with the West Asia crisis raising exporters' working-capital needs and a new sanction act threatening U.S. trade. Calls for RBI flexibility and reforms to NBFC revolving-credit rules underscore ongoing regulatory friction.
Why it matters
Improved credit access could boost India's vast MSME sector, a key driver of jobs and growth, amid global economic headwinds.
In this story
