In a significant advancement for India’s micro, small, and medium enterprises (MSMEs), Finance Minister Nirmala Sitharaman is set to unveil a Unified Payments Interface (UPI)-powered digital lending platform on March 6. This initiative aims to enhance credit access for MSMEs through their digital transaction history, eliminating the need for collateral.
- The UPI-based digital lending facility will empower MSMEs with easier access to credit.
- It aligns with the Union Budget 2025-26, focusing on MSME growth and financial inclusion.
Digital Lending to Empower MSMEs
The upcoming launch of the UPI-powered digital lending facility is a game changer for India’s MSMEs. This facility will allow MSMEs to secure loans based on their digital transaction history, thus streamlining the process of obtaining credit. By utilizing their transaction data, MSMEs can enjoy seamless, collateral-free credit, addressing a long-standing barrier to financing. A dedicated portal will be introduced to facilitate this process, integrating participation from major public and private sector banks. This holistic approach builds on the successful pilot initiatives previously conducted by the State Bank of India (SBI) and the Bank of Maharashtra, which have laid the groundwork for a nationwide rollout of this digital lending model.
Key Budgetary Support for MSMEs
This initiative is firmly rooted in the Union Budget for 2025-26, which emphasizes the importance of MSME growth and financial inclusion. During her Budget speech, Sitharaman pointed out that over one crore registered MSMEs employ 7.5 crore people and significantly contribute 36% to India’s manufacturing sector. Furthermore, MSMEs are responsible for driving 45% of the country’s total exports, strengthening India’s position as a global manufacturing hub. To support this growth, the government has increased investment and turnover limits for MSMEs to 2.5 and 2 times, respectively. This adjustment is aimed at fostering technological advancement and improving credit access for these enterprises.
Moreover, credit guarantee cover for MSMEs has been doubled to Rs 100 million, unlocking an impressive Rs 1.5 trillion in additional credit over a span of five years. As part of the initiative, customized credit cards with a Rs 50 million limit will be introduced for micro enterprises registered on the Udyam portal, with a target of issuing 10 lakh cards in the first year. This comprehensive support framework showcases the government’s commitment to empowering MSMEs and enhancing their operational capabilities across sectors.
A Game Changer for MSME Financing
The launch of the UPI-based lending facility is poised to be a transformative step in the financing landscape for MSMEs in India. This innovative approach will simplify credit access, reducing the reliance on traditional collateral-based lending practices. By leveraging digital transaction histories, the government is not only boosting financial inclusion but also providing small businesses with the necessary tools to thrive in a competitive market.
