RBI Deputy Governor Rajeshwar Rao pitches for more credit push to MSMEs

RBI Deputy Governor Rajeshwar Rao pitches for more credit push to MSMEs

RBI Deputy Governor Rajeshwar Rao has sought more credit push to micro, small and medium enterprises, and said that banks and other financial institutions should to see the MSME sector as an area of opportunity.

“Another critical issue in India’s credit market has been the consistent gap between the demand and supply of credit to MSMEs. This has to be seen as an area of opportunity by the banks and other financial institutions,” he had said at the recent 31st Annual Management Convention of Thrissur Management Association, according to a Reserve Bank of India statement on April 3.

The MSME sector contributes around 30 percent to India’s GDP, 45 percent to its manufacturing output, and 48 percent to exports, Rai had said.

Another emerging area of focus is making finance available for transitioning to a low carbon economy, he said. "All of us are now cognisant of the global challenge that climate change poses to our planet and its impact which is reverberating across the world. If we fail to take timely action, the consequences will be irreversible."

Banks can play an essential role in financing the transition to a low-carbon economy by channelling finance to sustainable and green projects as well as by developing new financial products that incentivise green initiatives, according to him.

Rao said that financial inclusion needs to be redefined by developing bespoke products and services that are best suited to different strata of the society depending upon their income levels. Towards this end and to enable easy, adequate, and customised credit, the Reserve Bank has made provisions for differentiated banking licence, he said.