If Banks Refuse Credit To MSMEs, We'll Act Against Them: Manjhi

“We are aware that the MSME sector is going through some challenges, but we are committed to providing all possible support and assistance to them promptly,” Jitan Ram Manjhi, Union Minister for MSMEs in an interview to The Secretariat said.

Manjhi, who has been holding a series of meetings with stakeholders, said that strict steps will be taken against banks if they are found unwilling to give credit to MSMEs. Banks have often sought collateral from the credit-seeking MSMEs.

“We have taken up this issue, and banks have been told. This has been discussed with the finance ministry also,” Manjhi said. However, he pointed out that banks are mandated to provide loans to the MSMEs as they have to adhere to the credit targets.

Though the Reserve Bank of India’s (RBI) revised and reviewed guideline on priority sector lending (PSL) is aimed at unlocking credit flow into MSMEs, the stringent regulatory norms pertaining to non-performing assets (NPA), have often pushed banks into raising an early warning alarm on any delayed payment of interest or principal amount.  

The Union Budget this year has increased credit guarantee cover for the MSMEs from Rs 5 crore to Rs 10 crore, providing additional credit of Rs 1.5 lakh crore over five years.

In a post-Budget webinar, Prime Minister Narendra Modi said there is an urgent need to develop fresh credit delivery modules to make low-cost funds available seamlessly and easily accessible for MSMEs.

"We need to develop new modes for credit delivery, ensuring MSMEs have access to low-cost and timely credit," Modi said, adding that five lakh first-time women and entrepreneurs who are categorised as scheduled castes and scheduled tribes will be provided loans of up to Rs 2 crore.

Even as banks are mandated to meet the 15 per cent lending target for MSMEs, the credit distribution needs to be even and not concentrated on a few.

“We are keeping a very close watch on the credit needs of the MSMEs,” Manjhi said.

The minister said that among the 6 crore MSMEs in the country, a large number can be categorised as micro units. “We are focused on these micro units and the government will do all that it can to ensure that they do not have any issues related to credit,” he said.

The minister also pointed out that though there is apprehension over the impact of the US tariff issue on MSMEs, their exports will not be dented. “I am confident that the US tariff confusion will not have any impact on the exporting MSME,” he said. MSMEs account for more than 40 per cent of the country’s exports.

According to official data, MSMEs exports increased from Rs 3.95 lakh crore in 2020-21 to Rs 12.39 lakh crore in 2024-25. As per the Udyam Registration Portal and Udyam Assist Platform, the sector has provided over 25 crore jobs, as per the latest data.

“We understand the criticality of the MSME sector in terms of employment generation. After agriculture, the MSME sector provides the largest number of jobs,” Manjhi said.