RBI Governor Urges Banks to Treat MSMEs as Growth Partners, Not Just Borrowers

Reserve Bank of India Governor Sanjay Malhotra has urged banks to treat micro, small and medium enterprises as growth partners rather than mere borrowers, a call that has renewed attention on one of the Indian economy's most persistent challenges, getting affordable credit to smaller businesses.

Why MSMEs matter to the economy

MSMEs employ millions of people and sit inside supply chains that stretch from manufacturing to services. They are often the first rung of formal employment and a vital link feeding components, goods and services to larger firms.

Yet despite their economic weight, many still struggle with collateral gaps, delayed payments from larger buyers, heavy paperwork and uneven digital readiness, all of which make it harder for them to borrow, invest and grow.

What the governor's message signals

The intervention matters because banks hold considerable sway over whether small firms expand, hire and move into the formal economy. A shift in how lenders view these enterprises could change the flow of credit to viable but underserved businesses.

The governor's framing points toward smarter lending practices that look beyond traditional collateral and assess a firm's actual ability to repay.

Pathways to better credit access

Several practical changes are seen as ways to widen finance without weakening risk controls or pushing borrowers into stress.

• Better underwriting that judges genuine business viability
• Cash-flow based lending instead of collateral-heavy models
• Faster dispute resolution and quicker release of delayed payments
• Simpler documentation and stronger digital readiness support
• Risk controls that protect both borrowers and bank balance sheets

“Banks should see MSMEs as growth partners, not just as borrowers.”

— RBI Governor Sanjay Malhotra

The underlying policy challenge is delicate: expanding finance to small firms while protecting borrowers from over-indebtedness and banks from a build-up of poor-quality loans. If lenders respond to the governor's appeal with cash-flow based products and faster grievance redress, credit could reach more of the firms that drive jobs and local growth, without sacrificing prudence.

The NE Times View

Exhortation is cheap; MSMEs have heard banks called their partners for decades while collateral demands and risk aversion told a different story. The governor's framing is right, but it needs teeth: better credit-scoring of cash-flow data, faster dispute resolution and accountability when lending targets are missed. India's job growth runs through these firms, so the gap between rhetoric and disbursed rupees is the real metric.

This article is original commentary and analysis by The NE Times. Background facts were referenced from Business Standard and The Economic Times.