Latest news with #VivekIyer
Mint
3 days ago
- Business
- Mint
Bank loan sanctions to MSMEs for job creation down nearly a third in FY25
Bank loans sanctioned to India's micro, small, and medium enterprises (MSMEs) under the Prime Minister's Employment Generation Programme (PMEGP) dipped by nearly a third to ₹12,315 crore in FY25, from ₹17,759 crore in FY24. The development assumes significance since MSMEs contribute around 29% to India's GDP. This comes in the backdrop of the government reworking its revival framework for MSMEs to ensure continuity of bank credit during their stress period. Launched in 2008 by merging Prime Minister's Rojgar Yojana and Rural Employment Generation Programme, PMEGP is a flagship credit-linked subsidy scheme of the government. Entrepreneurial demand weakens Bank loans sanctioned to MSMEs increased in FY22 in the wake of the covid-19 pandemic, and continued to increase till FY24. From FY22 to FY24, the amount of bank loans sanctioned to MSMEs nearly doubled from a little over ₹9,000 crore to nearly ₹18,000 crore, before falling to FY25 levels of ₹12,315 crore, according to data provided by the MSME ministry. Also Read: Kanpur node is key in UP Defence Corridor for indigenous manufacturing: PM Modi The dip in sanctioned loans also reflected a reduction in the number of businesses seeking credit. The number of businesses which received bank loans under the scheme in FY25 is lower than that in FY22, according to MSME ministry data. In FY25, about 1,08,923 MSMEs received loans from banks under the PMEGP, less than FY22's 1,09,127, after peaking in FY24 with 1,65,725 businesses, the data showed. Global uncertainty is likely to have doused entrepreneurial sentiment for smaller businesses in FY25, banking experts said. MSME growth is driven by domestic and global macroeconomic environment, said Vivek Iyer, partner and financial services risk leader, Grant Thornton Bharat. "FY25 has been categorized with many uncertainties ranging from geopolitical stress points in west Asia, the Russia Ukraine conflict, Sino-American rivalry, the impending US election outcome and then the subsequent outcome of the US election. When sentiment is poor, demand to start ventures is poor and hence demand for credit is poor," he said. Also Read: India remains fastest-growing economy for fourth year straight: FM Sitharaman Iyer clarified that banks had not changed their assessment criteria for MSME loans, highlighting that the dip in sanctioned bank loans is a demand-side issue, and not a supply-side problem. Access to finance still a hurdle The key objective of the PMEGP was to aid micro enterprises of self-employment ventures to provide employment to artisans and youth in both rural and urban regions. The intention of the scheme was to curb the migration of youth from rural to urban regions, the MSME ministry annual report for FY25 said. Under the scheme, the central government provides a part of the capital required to start a venture. Nearly one million micro enterprises have been assisted since the inception of the scheme till December 2024 with aid of ₹26,124 crore, providing estimated employment opportunities to over 80 lakh people, the MSME ministry FY25 annual report said. Lack of access to capital has been a key hurdle in MSME growth in India. A study by Niti Aayog and the Institute for Competitiveness in May 2025 cited Reserve Bank of India (RBI) data to show that MSMEs continued to have a small share of the credit to businesses deployed by 41 scheduled banks from 2020 to 2024. Also Read: Govt relaxes rules to boost GST registration among small businesses In September 2020, 14% of all credit deployed by these banks went to micro and small enterprises, while 4% went to medium enterprises. The situation improved by September 2024, when 20% went to micro and small enterprises, and 9% went to medium enterprises. The share of credit deployed to large businesses, however, still remained 71% in 2024, according to the data. In a 2022 World Bank Enterprise Survey, over a fifth of Indian MSMEs said access to finance is their biggest obstacle.
Entrepreneur
6 days ago
- Business
- Entrepreneur
India's Real GDP to Grow at a Rate of 6.5% in FY26: RBI Annual Report
According to RBI's report, the strength of India's macroeconomic fundamentals, pointing to resilient domestic demand, rising investment activity, and continued momentum in services and manufacturing You're reading Entrepreneur India, an international franchise of Entrepreneur Media. India is poised to remain the world's fastest-growing major economy in FY2025–26, with the Reserve Bank of India (RBI) projecting a real GDP growth rate of 6.5 per cent. Despite global uncertainties and financial volatility, the central bank described the risks to this forecast as "evenly balanced." According to RBI's "2024–2025 Annual Report" released on Thursday, the strength of India's macroeconomic fundamentals, pointing to resilient domestic demand, rising investment activity, and continued momentum in services and manufacturing. "Looking ahead to 2025-26, the Indian economy is well-positioned to sustain strong growth, supported by momentum in investment activity and improving consumption demand," it stated. Vivek Iyer, partner and financial services risk leader, Grant Thornton Bharat said, "Financial stability, inflation management and sustainable development are key themes that emerge from the RBI financial stability report for 2024-25. With global demand being subdued and domestic consumption and investment expected to drive economic growth, the financial services ecosystem will need to play a larger role as an enabler for overall growth and hence innovation and sustainable development will play a key role going forward." The revival in consumption, paired with the Centre's focus on capital expenditure while maintaining fiscal prudence, is expected to anchor growth. The government has allocated 4.3 per cent of GDP toward effective capital spending in FY26, with an additional INR 1.5 lakh crore to support state-level infrastructure outlays. The fiscal deficit target has been narrowed to 4.4 per cent, reinforcing the broader consolidation path. Private investment is gaining traction, driven by healthy balance sheets of banks and corporates. The report noted signs of rural consumption recovery and renewed manufacturing expansion, suggesting a "durable domestic demand revival" that will underpin the economy's growth engine. The services sector, already a key contributor, continues to power ahead. "The services sector has emerged as a mainstay of growth, contributing significantly to value addition and employment," the RBI noted. Growth here is being propelled by digital adoption, expanded financial access, and robust demand for technology-led services. Agriculture is also expected to post strong performance in FY26, aided by an above-normal monsoon forecast and several new policy interventions. "The prospects for agriculture sector appear favourable… Various new initiatives have been announced for boosting agriculture sector," the report said, citing schemes such as PM Dhan-Dhaanya Krishi Yojana and expanded credit under Kisan Credit Card. Inflation is projected to moderate to four per cent, though the RBI flagged weather-related food price volatility as a key risk. In response, the central bank adopted an accommodative stance in April 2025, cutting the repo rate by 25 basis points to six per cent. The manufacturing sector is set to benefit from the Production Linked Incentive (PLI) scheme and the National Manufacturing Mission. These initiatives are expected to reinforce the 'Make in India' push, boost capacity utilisation, and stimulate job creation. Energy and climate commitments also feature prominently in the report. India aims to ramp up nuclear capacity to 100 GW by 2047, with new support for Small Modular Reactors and rooftop solar initiatives. States have also been granted extra borrowing room for power sector reforms. The central bank highlighted India's external resilience, pointing to a sustainable current account deficit supported by services exports and remittances. However, it warned of persistent challenges from trade fragmentation and geopolitical tension. The RBI also reiterated its push for internationalising the rupee and fostering local currency trade with partners like Maldives and Mauritius. On the financial front, while markets remain stable, the RBI called for more robust interest rate risk management and funding diversification, especially among non-banking financial companies (NBFCs). It also flagged the need for improved corporate governance and risk oversight.
Entrepreneur
28-05-2025
- Business
- Entrepreneur
Is India Doing Enough to Fuel NBFC Growth?
According to RBI data, credit growth to NBFCs decelerated sharply to 7.8 per cent in November 2024, down from 19 per cent a year earlier. Opinions expressed by Entrepreneur contributors are their own. You're reading Entrepreneur India, an international franchise of Entrepreneur Media. Non-Banking Financial Companies (NBFCs) have long been the unsung workhorses of India's financial architecture. Often reaching where traditional banks don't, NBFCs serve as critical credit wires in semi-urban and rural regions, powering the country's micro, small and medium enterprises (MSMEs), informal sector, and climate-forward financing initiatives. Recognizing their indispensable role, the Indian government, alongside the Reserve Bank of India (RBI), has stepped up support in recent years. But is this support enough to ensure sustainable growth? The intent is certainly visible. "Government understands the importance of credit in an economy like India, especially the underserved areas of the country," said Vivek Iyer, partner and financial services risk leader at Grant Thornton Bharat. "Hence, it focuses on creating an enabling environment through the regulator, which is the Reserve Bank of India, for a robust credit access environment through the NBFCs." The RBI has shown flexibility and foresight, particularly during economic stress. Regulatory forbearance measures and discussions around liquidity backstop arrangements underscore the shift from reactive to proactive oversight. According to Iyer, "Due credit must also be given to the regulator for applying regulatory forbearances during times of government is doing the right amount for the NBFC ecosystem." A defining moment came in early 2025 when the RBI reduced risk weights on bank exposures to well-rated NBFCs, a move widely seen as an effort to ease credit flows. "This marked a critical intervention aimed at improving systemic liquidity and easing access to funds," said Dhiraj Agrawal, CBO of Mufin Green Finance. This regulatory tweak is designed to incentivize banks to lend more actively to financially sound NBFCs, indirectly strengthening the broader credit chain. Beyond regulatory nudges, government-backed institutions like SIDBI and NABARD continue to offer crucial refinancing support, especially to smaller NBFCs operating in last-mile geographies. These bodies serve as lifelines for non-bank lenders that extend credit to micro-entrepreneurs and rural households. Moreover, the expansion of the Credit Guarantee Scheme (CGS) has provided additional firepower, allowing NBFCs to tap into banking lines while mitigating perceived credit risks. Yet, the numbers paint a more sobering picture. According to RBI data, credit growth to NBFCs decelerated sharply to 7.8 per cent in November 2024, down from 19 per cent a year earlier. This dip signals persistent liquidity constraints and a rising risk aversion, especially toward smaller or newer NBFCs without access to low-cost, long-term capital. Agrawal warns that structural problems remain. "To fully realize the potential of NBFCs in driving inclusive growth, targeted reforms are now necessary." He advocates for a tiered regulatory approach, increased access to concessional and blended capital, particularly for green and impact-focused lenders, and the creation of long-term funding avenues like ESG-linked bonds and pooled finance structures. "NBFCs remain a vital pillar of India's financial ecosystem," he emphasized, calling for regulatory clarity and deeper capital access to sustain their momentum. Deepak Aggarwal, co-founder, co-CEO & CFO of Moneyboxx Finance Limited, echoed similar sentiments. He credited the government for positive interventions such as the co-lending framework and the First Loss Default Guarantee (FLDG) structure. "These measures have improved credit flow in specific segments and encouraged collaboration between banks and NBFCs for deeper financial outreach," he said. The FLDG, in particular, introduces a much-needed regulated mechanism for risk-sharing in digital lending—a space that has been both a frontier and a flashpoint for regulatory concern. Meanwhile, the co-lending framework has allowed NBFCs to leverage banks' balance sheets, creating a more structured risk-sharing ecosystem. Still, as Deepak noted, "There is room for further support to help NBFCs scale their impact, especially those serving rural and semi-urban borrowers." While refinancing facilities exist, their scale and reach remain limited. He emphasized that NBFCs can only continue playing a meaningful role in financial inclusion if they are granted broader access to stable capital and more streamlined funding pathways. As per a report by CareEdge Ratings, MSME lending has witnessed robust growth in recent years, with NBFCs emerging as the front-runners, outpacing the growth rates of both private and public sector banks. Between FY21 and FY24, NBFCs recorded a 32 per cent compound annual growth rate (CAGR) in MSME lending, albeit on a smaller base, compared to 20.9 per cent for private banks and 10.4 per cent for public sector banks. Read more
Mint
19-05-2025
- Business
- Mint
Swipe card, scan QR? Buying on UPI may be about to get cheaper
Scanning that UPI code to make a purchase may become cheaper than swiping your credit card, if a consumer affairs ministry effort on payment transaction fees bears fruit. The government is working on a plan that will pass on the cost benefits of its popular unified payments interface (UPI) to consumers and incentivize its use in one go, three people familiar with the discussions said. Ministry officials will soon meet industry stakeholders to take the plan forward, one of the three people said on the condition of anonymity. Every time a credit card is swiped, the merchant pays a fee of 2-3% to the bank and a payment gateway such as Visa or MasterCard, called the merchant discount rate (MDR). Most merchants do not pass on the fee to the customer, but absorb it themselves. To illustrate, in a ₹100 credit card payment, the merchant keeps ₹98, and passes on ₹2 as MDR. In UPI, the merchant retains the entire ₹100, since UPI has no MDR. The disparity is stark in e-commerce platforms, which charge the same amount regardless of payment mode. At retail outlets, while most merchants absorb MDR, some pass it on to customers. Also read: Govt approves 187 startups for tax exemption under revamped Section 80-IAC framework If the plans go through, the UPI user will pay ₹98, while the credit card user pays ₹100, implying a ₹2 discount for the former. The ministry will consult e-commerce leaders, banking service providers, National Payments Corp. of India (NPCI), Department of Financial Services (DFS), consumer groups and others before finalizing the way forward, the third person added. Plans are still early and more details are expected after the stakeholders' meeting likely in June, this person said. Queries emailed to the consumer affairs ministry remained unanswered. The radical plan comes at a time UPI has eclipsed all other payment modes, growing 42% by volume to 185.85 billion transactions in FY25, and 30% by value to ₹260.56 trillion. Between FY20 and FY25, UPI transaction volumes expanded at a compound annual growth rate (CAGR) of 72%. Between FY22 and FY25, about 260 million new users and 55 million new merchants joined UPI platform. Around 450 million used UPI in 2024. Industry experts said the move opens space for more nuanced pricing. Vivek Iyer, partner and financial services risk leader at Grant Thornton Bharat, said, 'Market infrastructure initiatives like UPI have democratized payments because of zero MDR. But other channels that incur costs and offer better customer experience can still justify MDRs. Differential pricing should be possible, especially when better service or personalization is part of the offer." Also read: India could use Apple's exit to spur hi-tech manufacturing push: GTRI Iyer added that e-commerce platforms can adopt a layered strategy. 'For luxury purchases, the choice of payment channel may not affect buyer behaviour, but for regular purchases, price sensitivity is much higher. So, there's scope to design differentiated offerings around that." He emphasized that zero MDR on UPI should continue, given its broader economic impact. 'UPI enables the inclusion of many commercial activities in the formal economy. It serves a national interest and should remain focused on that goal for a few more years." With countries like Singapore, the UAE and France showing interest in adopting UPI, those involved believe that aligning domestic policy to reflect its cost advantages for consumers could strengthen India's digital public infrastructure and cement its leadership in inclusive fintech innovation. 'Consumers currently pay the same whether they use a card or UPI, despite the cost structure being different," said the second person, who is involved in the discussions. 'If UPI is cheaper and simpler, we are looking at ways to make that benefit visible to users." Business owners typically negotiate MDR charges before signing up for card swipe machines, based on the transaction value they expect from customers. High MDR is one of the primary reasons merchants prefer UPI to card-based payments. 'The move will definitely benefit consumers greatly. They would be rewarded for using UPI as their mode of payment," said Ashim Sanyal, chief executive officer of Consumer Voice, a consumer rights organization. Finance minister Nirmala Sitharaman recently underscored the need to target one billion UPI transactions per day within the next 2-3 years and stressed on accelerating the internationalization of UPI through interoperable frameworks and expanding global payment acceptance. Also read: Goods trade deficit widens to a five-month high of $26.42 billion in April The Reserve Bank of India wants credit and debit card issuer banks to provide customers with options to choose from multiple payment networks—such as Visa, MasterCard and RuPay—at the time of issue. The popularity of UPI has pushed banks to issue RuPay cards that facilitate UPI transactions. RuPay credit cards attract MDR of 1-2%. According to experts, merchants set product prices which remain the same for all payment modes. The only benefit passed to consumers in the form of lower prices is when a merchant accepts only UPI payments. Meanwhile, the Payments Council of India, representing various non-banking payment players, has unsuccessfully lobbied the government to introduce MDR on UPI and RuPay debit cards, pointing out the cost of operating back-end systems. It has proposed MDR for RuPay debit cards for all merchants and an MDR of 0.3% for UPI, applicable only to large merchants with annual sales above ₹20 lakh. The council says this is necessary for the long-term viability of the system, as zero charges prevent payments firms, banks and fintech companies from investing in critical areas such as cybersecurity, innovation and infrastructure upgrades.
