MSMEs Can Strengthen Financial Health Through Digital Payments and Formal Registration: RBI Deputy Governor

MUMBAI: Micro, Small, and Medium Enterprises (MSMEs) in India can significantly improve their financial prospects by adopting formal registration and embracing digital payment systems, according to Swaminathan J, Deputy Governor of the Reserve Bank of India (RBI). Speaking at the CEO Forum of the Federation of Telangana Chambers of Commerce and Industry in Hyderabad, Swaminathan emphasized the importance of building a transparent financial footprint, which will foster credibility and enhance access to timely credit.

While MSMEs are integral to India’s economy, contributing 30% of the GDP and employing a vast workforce, they face significant hurdles in securing adequate financing. One of the major challenges is the lack of formalization, which hampers their ability to gain the trust of financial institutions. Swaminathan stressed the need for MSMEs to build a strong credit history and adopt digital payments, which can help them maintain accurate financial records and unlock new financing opportunities.

Swaminathan highlighted that many MSMEs struggle with asset-based lending because they lack the necessary collateral. As a result, these businesses often remain excluded from formal credit channels. Digital payment systems, however, can generate valuable data that can improve the assessment of their financial health, enabling banks to offer more customized financial products. Platforms like the Trade Receivables Discounting System (TReDS) are also gaining momentum, helping MSMEs unlock liquidity by facilitating trade receivables financing.

To address these challenges, the RBI has called for increased digital adoption among MSMEs, which will not only streamline their cash flow but also help them scale more efficiently. The RBI’s expert committee has previously estimated a credit gap of Rs 20-25 trillion, underscoring the urgent need for focused interventions.

Web Team, C6N