RBI Calls for Aggressive Push to Digital Lending and TReDS Adoption for MSME Credit
SDG 8: Decent Work and Economic Growth | SDG 9: Industry, Innovation and Infrastructure
Institutions: Reserve Bank of India (RBI) | Ministry of MSME | Ministry of Finance
The Reserve Bank of India (RBI) held its 30th Standing Advisory Committee (SAC) Meeting in Coimbatore, where Deputy Governor Shri Swaminathan J strongly advocated for strengthening the MSME credit ecosystem through technology and new lending models. The SAC, which includes senior officials from the Ministries of MSME and Finance and major banks, reviewed strategies to address the critical credit gap in the sector.
The RBI emphasized the immediate need to promote wider adoption of digital platforms like the Trade Receivables Discounting System (TReDS) to address information asymmetry and the problem of delayed payments. The central bank is actively facilitating this shift through existing initiatives like the Unified Lending Interface (ULI) and the Account Aggregator framework, which support cash-flow based lending over traditional collateral.
Additionally, the Deputy Governor stressed the importance of ensuring βfair, transparent, and empathetic lending practicesβ for MSMEs, including the proactive revival and rehabilitation of distressed but viable units. During the interactive session, industry associations highlighted the growing challenges posed by geopolitical uncertainty.
This high-level consultation underscores the governmentβs dual commitment to technological transformation and financial inclusion. By pushing for cash-flow-based models and TReDS, the RBI is attempting to use digital public infrastructure to fundamentally rewire the MSME lending process, making credit decisions faster and fairer for small businesses that lack traditional collateral.
What is the Trade Receivables Discounting System (TReDS)? β TReDS is an online electronic platform that facilitates the financing/discounting of trade receivables (invoices) of Micro, Small, and Medium Enterprises (MSMEs) through multiple financiers. It helps MSMEs, which frequently face issues with delayed payments from large buyers, to quickly convert their sales invoices into cash, thereby improving their liquidity and working capital cycle.
Relevant Question for Policy Stakeholders: What cross-ministerial coordination mechanism will be established to ensure the fair and immediate settlement of delayed payments to MSMEs, a challenge acknowledged by the Deputy Governor?
Follow the full news here: 30th Meeting of the Standing Advisory Committee (SAC) to Review the Flow of Credit to the MSME Sector