In a renewed push to address long-standing credit bottlenecks faced by India’s micro, small and medium enterprises (MSMEs), the SME Chamber of India has submitted a detailed set of reform recommendations to the Department of Financial Services (DFS) and the Reserve Bank of India (RBI).
The Chamber is advocating for a comprehensive credit overhaul to simplify loan access, reduce costs, and improve policy continuity for the sector. It proposes the establishment of a Permanent Standing Advisory Committee on MSME Credit at the RBI — a move aimed at ensuring year-round monitoring and accountability.
Long-Term Issues: Fragmented Access, High Costs
In its memorandum to M. Nagaraju, Secretary of DFS, the Chamber pointed out that MSMEs continue to struggle with high interest rates, limited engagement from senior bank officials, and slow approval timelines. The burden is especially high for micro enterprises, which often take up to a decade to scale into small businesses. Small and medium enterprises, in turn, face prolonged delays in obtaining working capital for expansion or diversification.
“The current system lacks uniformity and empathy,” said Chandrakant Salunkhe, President of the SME Chamber of India and Federation of Indian SME Associations (FISA). “Our proposals are designed to make the credit landscape more inclusive, faster, and accountable — especially for Tier 2 and Tier 3 entrepreneurs.”
Key Recommendations to Boost Credit Flow
The Chamber’s proposals include:
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Waiver of processing fees and prepayment penalties for loans up to ₹10 crore
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Portability of loans and accounts across banks for smoother transitions
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Simplified loan documentation and uniform application formats
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90% project financing for new units
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Removal of personal guarantees for smaller loans under CGTMSE
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Help desks at bank branches and online platforms for MSME support
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Rejection transparency, with mandatory issuance of denial letters stating reasons
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Affordable credit lines for branding and global market access
It also recommended one-time settlement schemes for stressed enterprises with longer moratorium periods, making restructuring less punitive for businesses navigating temporary downturns.
Push for a Permanent RBI Committee
In a separate representation to RBI Governor Sanjay Malhotra, the Chamber proposed a Permanent Standing Advisory Committee (SAC) to review and monitor MSME credit performance. Unlike the existing bi-annual SAC meetings, the proposed committee would operate year-round with fixed tenure members.
As per the suggestion, the RBI Governor would chair the annual review. The proposed structure would also include:
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An RBI Executive Director as Member Secretary
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The Indian Banks’ Association (IBA) as the nodal coordinator
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Financial institutions, national and state-level MSME associations as permanent members
According to Salunkhe, a standing body would ensure “continuity and follow-through”, which is currently lacking due to rotating SAC memberships and ad-hoc agendas.
MSMEs Deserve Structured Support
With MSMEs accounting for nearly 30% of India’s GDP, over 40% of exports, and being the second-largest employment generator after agriculture, the Chamber insists that India’s development agenda hinges on empowering this sector.
“Without a structured and accountable credit framework, the sector’s aspirations will remain unmet,” Salunkhe said. “The time has come to institutionalize MSME-centric policymaking.”