written by Khatabook | December 8, 2021

UPI-like platform needed for easy credit disbursal to MSMEs, says Union IT Minister

Against the backdrop of a huge credit gap that exists for MSMEs, Union Minister for Electronics and IT Ashwini Vaishnaw has suggested the creation of a seamless digital platform like Unified Payments Interface (UPI) to ease the lending of credit to Micro Small and Medium Enterprises (MSMEs). 

According to an estimate by the World Bank, MSMEs in India face a credit gap of almost $380 billion. However, they contribute to nearly 30% of the GDP as per 2019-2020 data released by PIB (Press Information Bureau).

Speaking at the Digital Payment Utsav, a part of the ‘Azadi ka Digital Mahotsav’ which celebrated India’s achievements in the digital space, the IT Minister urged the banks and other stakeholders in India to create a powerful and robust digital platform like the UPI for providing quick and easy credit to small and medium businesses and other micro enterprises. This will result in reduced paperwork and smooth disbursal of loan funds, especially to “those who are at the bottom of the.pyramid.”

He said that the banking industry already has a vigorous system in place which includes Aadhar, mobile phones, UPI and digilocker and challenged the bankers to come up with an innovative digital lending solution for MSMEs in three months. He even promised to look at any promising concepts brought to him after the 3-month period.

Small businesses often face a shortage of working capital as many banks are reluctant to provide credit due to fear of them becoming non-performing assets (NPAs) and other uncertainties related to repayment. Many micro and small businesses do not have proper documentation for accessing credit from these institutions and resort to taking loans from informal sources at high rates of interest.

Rajeev Chandrasekhar, the Minister of State for Electronics and IT, also emphasized that “technology will play a big, defining role in the shaping the future of the country.” Speaking at the event, he said that India is leading the world in the digital space and should continue to do so.

The MoS also assured that the “IT Ministry is fully committed to playing the role of an enabler and catalyst for this ecosystem to grow and thrive.”

Several innovative solutions including payments-on-the-go were also launched at the event. In a release by the Ministry of Electronics and Information Technology, it was announced that banks such as Bank of Baroda and City Union Bank launched “Rupay-on-the-Go” a contactless payment system. Moreover, India Post Payments Bank-Punjab National Bank, Kotak Bank, YES Bank, Indian Overseas Bank, ICICI Bank, Indian Bank, Bank of Maharashtra, and City Union Bank also brought out contactless credit cards on the RuPay network.

Union Bank also announced an android-based mobile app SOFTPOS for point of sales (PoS), which will facilitate the adoption of digital payments, catering to nearly 1.5 crore retail stores/ Kiryana stores in the country.

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