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Measures like IBC, market-based stressed asset transfer, and EASE reforms drive  NPA recovery and promote responsible lending

Initiatives implemented to improve credit flow to Micro, Small and Medium Enterprises (MSMEs)

UPI transactions grow from 92 crore in FY 2017-18 to 18,587 crore in FY 2024-25, with a CAGR of 114%

The Government has taken various measures over the last few years to address the issues related to credit discipline, responsible lending, improved governance, adoption of technology, and proper regulation of Co-operative banks have been taken by the Government / Reserve Bank of India (RBI.)

These include, inter alia, the following:

1. Credit discipline has been instilled through—

1. enactment of the Insolvency and Bankruptcy Code (IBC);
2. setting up of the Central Repository of Information on Large Credits (CRILC) by RBI to monitor corporate loans and systematic checking of high-value accounts for wilful default and fraud.

2. Recognition and resolution of stressed Assets - To protect financial institutions in case of default/delay in payment by large borrowers, multiple steps have been taken viz.:

1. putting in place a framework for early recognition and time-bound resolution of stress.
2. automated Early Warning Systems to detect and reduce slippage of accounts into NPAs using third-party data and workflow for time-bound remedial actions.
3. strengthening Market based mechanisms to better manage the credit risk on the balance sheets through a comprehensive framework for transfer of stressed assets to eligible transferees.
4. National Asset Reconstruction Company Limited (NARCL) has been set up to consolidate and takeover stressed debt, fragmented across various lenders and thereafter manage and dispose it off to buyers for better realisation.
    
5. Governance Reforms in PSBs have been carried out through reforms like arms length selection of top management through Financial Services Institutions Bureau, introduction of Non-Executive chairmen in Nationalised Banks, widening talent pool and instituting performance-based extension for Managing Directors.
6. Enhanced Access & Service Excellence (EASE) reforms have enabled objective and benchmarked progress on all key areas in PSBs such as governance, prudential lending, risk management, technology- and data-driven banking, and outcome-centric HR.
7. Amalgamation of PSBs has led to economies of scale, increase financial capacity, technology adoption and overall efficiency enhancement.
8. Massive Technology adoption in banking has been instrumental in expanding financial inclusion, improving efficiency, and enabling real-time service delivery. Digital payment transactions have grown phenomenally as a result of various initiatives viz., Jan-Dhan–Aadhaar–Mobile (JAM) linkage, interoperable Bank Mitras, Unified Payments Interface (UPI) and Direct Benefit Transfers (DBTs).
9. The Banking Regulation (Amendment) Act, 2020 was brought in to enhance the governance, financial stability, and regulatory oversight of co-operative banks, which serve millions of citizens, particularly in rural and semi-urban areas.
10. The Banking Laws (Amendment) Act, 2025 has been notified to enhance governance standards, strengthen protection for depositors and investors, improve audit quality in PSBs, shift statutory reporting by banks to the RBI and streamline nomination processes for customer convenience.

11.  

    MSME Measures

    The measures implemented to improve credit flow to Micro, Small and Medium Enterprises (MSMEs) and achievements are as under:

12. Mutual Credit Guarantee Scheme for MSMEs (MCGS-MSME)- It is a government-backed initiative designed to help MSMEs access loans to grow their businesses. This scheme offers credit guarantee, making it easier for MSMEs to obtain loans, especially for purchasing essential equipment and machinery. The Scheme provides credit guarantee cover to lenders (Scheduled Commercial Banks, All India Financial Institutions, NBFCs) for their term loans up to Rs. 100 crore to MSMEs for their projects involving purchase of equipment/machinery. The Scheme has been launched recently and is valid till issue of guarantees on loans cumulating to Rs. 7 lakh crore or 4 years from the date of issue of guidelines (i.e. 27.1.2025), whichever is earlier.
13. Emergency Credit Line Guarantee Scheme (ECLGS) - ECLGS provided 100% guarantee cover to Member lending Institutions (MLIs) in respect to the credit facility extended by them to eligible borrowers, including MSMEs and business enterprises for helping them meet their operational liabilities and restarting their businesses. The Scheme was valid till 31.3.2023 and provided liquidity support of Rs. 3.68 lakh crore to 1.19 crore businesses, of which loans amounting to Rs. 2.42 lakh crore have been sanctioned to 1.13 crore MSMEs under ECLGS.
14. Subsequent to Union Budget 2024-25 announcement, the Union Finance Minister had launched New Credit Assessment Model for MSMEs on 06.03.2025. The model leverages the digitally fetched and verifiable data and devises automated journeys for MSME loan appraisal using objective decisioning for all loan applications and model-based limit assessment for both Existing to Bank (ETB) as well as New to Bank (NTB) MSME borrowers.
15. Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), under the administrative purview of Ministry of MSME, provides guarantee cover up to 85%, for loans amounting to Rs. 10 crore or below, extended by eligible Member Lending Institution (MLIs) to Micro and Small Enterprises (MSEs). The annual guarantee fee has been reduced which ranges from 0.37% to 1.20%. As on 31.07.2025, CGTMSE has approved 1.22 crore number of cumulative guarantees worth Rs. 10.50 lakh crore.

16.  

     

    Digital Payments

    The total volume of digital payment transactions in the country has increased from 2,071 crore in FY 2017-18 to 22,831 crore in FY 2024-25, growing at a CAGR of 41%. During the same period, the value of transactions has grown from Rs. 1,962 lakh crore to Rs. 3,509 lakh crore.

    Further, the total monthly volume of digital payment has increased from 1,739 crore in June 2024 to 2,099 crore in June 2025. During the same period the value of transactions has increased from Rs. 244 lakh crore in June 2024 to Rs. 264 lakh crore in June 2025.

    UPI transactions, in particular, have grown from 92 crore in FY 2017-18 to 18,587 crore in FY 2024-25, with a CAGR of 114%. During the same period, the value of transactions has grown from Rs. 1.10 lakh crore to Rs. 261 lakh crore.

    In July 2025, UPI reached another milestone recording over 1,946.79 crore transactions in a single month for the first time.

    This information was given by Minister of State in the Ministry of Finance Shri Pankaj Chaudhary in a written reply to a question in Lok Sabha today.

     

The Government has been closely working with different stakeholders including the Reserve Bank of India (RBI), National Payments Corporation of India (NPCI), fintechs, banks and State Governments to increase the adoption rates of digital payments in the country including in tier-2 and tier-3 cities. RBI has setup a Payments Infrastructure Development Fund (PIDF) in 2021 to encourage deployment of digital payments acceptance infrastructure in tier-3 to 6 cities, North-Eastern States and Jammu & Kashmir. As on May 31, 2025, around 4.77 Crore digital touch points have been deployed through PIDF. Transactions during the last six financial years, i.e. FY 2019-20 to FY 2024-25 have seen a phenomenal increase. Over 65,000 crore digital transactions have taken place in the last 6 years  amounting to more than  Rs. 12,000 lakh crore.

The RBI has developed the Digital Payments Index (RBI-DPI) to measure the extent of digitisation of payments across the country. The index is published semi-annually and is based on March 2018 as the base period (Index = 100). As per the latest release, the RBI-DPI stood at 465.33 for September 2024, reflecting continued growth in digital payment adoption, infrastructure, and performance across the country.

In order to support small businesses and MSMEs in adopting digital payment systems to expand their customer base and improve efficiency, various initiatives have been taken by the Government, RBI and NPCI from time to time. These, inter alia, includes incentive scheme for promotion of low value BHIM-UPI transactions for small merchants, Trade Receivables Discounting System (TReDS) guidelines that allows for MSMEs to get their invoices discounted on the TReDS platform at competitive rates and rationalization of Merchant Discount Rate (MDR) for Debit Card Transactions.

The growing adoption of digital payments has revolutionized access to financial services, particularly for underserved and unserved communities. By enabling seamless, traceable transactions through platforms like UPI, digital payments have created a robust financial footprint for individuals and businesses. These footprints serve as alternative data points for financial institutions, allowing them to assess creditworthiness even in the absence of traditional documentation. As a result, more people are able to access formal credit channels, which not only empowers economic participation but also brings more entities into the formal financial ecosystem. Digital platforms like UPI have enabled citizens including small vendors and rural users to accept digital payments, reducing cash dependency and increasing formal economic participation.

This information was given by Minister of State in the Ministry of Finance Shri Pankaj Chaudhary in a written reply to a question in Lok Sabha today.

The New Digital Credit Assessment Model for MSMEs was announced in the Union Budget 2024-25. The model envisioned that the Public sector banks (PSBs) will build their in-house capability to assess MSMEs for credit, instead of relying on external assessment. PSBs would develop a new credit assessment model, based on the scoring of digital footprints of MSMEs in the economy. Subsequently, Union Finance Minister had launched the New Credit Assessment Model for MSMEs on 6th March, 2025.

The model leverages the digitally fetched and verifiable data and devises automated journeys for MSME Loan appraisal using objective decisioning for all loan applications and model-based limit assessment for both Existing to Bank (ETB) as well as New to Bank (NTB) MSME borrowers.

The digital footprints used by the model may include Pan authentication using National Securities Depository Limited (NSDL), Mobile and email verification using OTP, Application Programming Interface (API) fetch of GST data through service providers, Bank Statement Analysis using account aggregator, ITR upload and verification, API enabled commercial and consumer bureau fetch and due diligence using Credit Information Companies (CICs), fraud checks, through APIs, among others. The model is live with all banks with different loan amount threshold.

Under Traditional / Manual methods, banks rely on physical documents submitted by customers for manual underwriting. While under new credit assessment model, credit request and data submission as well as assessment is done entirely through digital process.

The introduction of the new digital credit assessment model does not involve any fundamental changes in the basic eligibility criteria for MSME loans in terms of regulatory norms or policy guidelines of individual bank. However, it simplifies the process of sanctioning loans and offers a more user-friendly and standardized approach by relying on digitally available data.

Between 1st April and 15th July, 2025, a total of 98,995 MSME loan applications have been sanctioned by the Public Sector Banks (PSBs) under New Credit Assessment Model.

Bank loans through new digital credit assessment model are decided within maximum of upto one day significantly reducing the turn around time (TAT) as compared to manual methods.

The benefits to MSMEs by use of this model include submission of application from anywhere through online mode, reduced paperwork and branch visit, instant in-principle sanction through digital mode, seamless processing of credit proposals, reduced TAT, credit decision based on objective data/ transactional behaviour among others.

Under the new model, credit decision is based on objective data/ transactional behaviour and credit history of the borrower. Further, credit request submission & assessment is done entirely through digital process which reduces subjectivity, fraudulent submission of credit information & error in decision making. This enables faster, transparent and more objective assessment of creditworthiness using system-generated credit logic and scorecards. Business Rule Engines (BREs) of banks will capture all risks as per its credit risk management policy.

This information was given by Minister of State in the Ministry of Finance Shri Pankaj Chaudhary in a written reply to a question in Lok Sabha today.

The Government of India (GoI) has announced the sale (re-issue) of (i) “6.68% Government Security 2040” for a notified amount of ₹16,000 crore (nominal) through price based auction using multiple price method and (ii) “6.90% Government Security 2065” for a notified amount of ₹16,000 crore (nominal) through price based auction using multiple price method. GoI will have the option to retain additional subscription up to ₹2,000 crore against each security mentioned above. The auctions will be conducted by the Reserve Bank of India, Mumbai Office, Fort, Mumbai on August 01, 2025 (Friday).

Up to 5% of the notified amount of the sale of the securities will be allotted to eligible individuals and institutions as per the Scheme for Non-Competitive Bidding Facility in the Auction of Government Securities.

Both competitive and non-competitive bids for the auction should be submitted in electronic format on the Reserve Bank of India Core Banking Solution (E-Kuber system) on August 01, 2025. The non-competitive bids should be submitted between 10:30 a.m. and 11:00 a.m. and the competitive bids should be submitted between 10:30 a.m. and 11:30 a.m.

The result of the auctions will be announced on August 01, 2025 (Friday) and payment by successful bidders will be on August 04, 2025 (Monday).    

The Securities will be eligible for “When Issued” trading in accordance with the guidelines on ‘When Issued transactions in Central Government Securities’ issued by the Reserve Bank of India vide circular No. RBI/2018-19/25 dated July 24, 2018 as amended from time to time.

The Government of India has taken many steps to fast-track exports and imports under the Authorized Economic Operator (AEO) framework. This was stated by Union Minister of State for Finance Shri Pankaj Chaudhary in a written reply to a question in Rajya Sabha today.

The key steps taken includes the following facilitation measures for AEO certificate holders:

• Higher level of facilitation in import and export of consignments;
• Facility of Direct Port Delivery (DPD) import containers and/or Direct Port Entry (DPE) for export containers;
• Automated Clearance and On-site examination for certain type of consignments;
• Facility of Deferred payment for Tier-III and Tier-II AEO certificate holders;
• Relaxed norms for submission of bank guarantee, wherever applicable;
• Recognition by Partner Government Agencies and other Stakeholders.
• AEO certificate holders also receive trade facilitation support from foreign customs administrations with whom India has signed Mutual Recognition Arrangement (MRAs), thereby enhancing their global trade efficiency.

  The Minister stated that as on 30th June, 2025, 5,892 AEO certificates were issued.

  Giving more details, the Minister further stated that the Government of India conducted more than 60 outreach programmes across the country in last 3 years, with particular focus on MSMEs to raise awareness about the AEO Scheme. Government of India conducted a global conference titled "India AEO Dialogue: Enhancing Global Trade Partnerships" in November 2024. Two conferences were also held in April and May 2025, with various stakeholders to raise awareness about the AEO programme. To increase participation of MSMEs, in 2020, along with prioritized processing of their applications, the accreditation process was relaxed for MSMEs, annexures to be provided with application for AEO certification by MSMEs were also rationalized. The norms for submission of bank guarantee, wherever required, were also relaxed for AEO Certificate holder MSMEs.

  Mutual Recognition Arrangement (MRAs) are based on mutual acknowledgment of supply chain security standards and AEO certificate holders of one country are recognized as secure and low-risk by the customs administration of another. Accordingly, exports by Indian AEO Certificate holders enjoy faster cargo release, fewer inspections and expedited customs clearance in partner countries, thus making exports by Indian AEO certificate holders more competitive and enhancing trade facilitation for them in partner countries.