India Needs to Bring 80% of MSMEs Under Formal Financial System: M Nagaraju

M Nagaraju, Secretary of the Department of Financial Services, emphasized the need to bring 80% of Micro, Small, and Medium Enterprises (MSMEs) under the formal financial system, up from the current 40%. Speaking at FIBAC 2024 in Mumbai, Nagaraju noted that while over 40 million MSMEs are registered in India, only 40% are part of the formal financial network. “Imagine if we could raise that number to 70% or 80%,” he said, highlighting the significant role MSMEs play both domestically and internationally.

Nagaraju pointed out that banks and financial institutions play a crucial role in fostering economic growth by offering accessible capital and financial services to businesses. He emphasized that banks have a responsibility to promote inclusive growth, which is fundamental to both economic and social development. Banks are extending their services to under-served and marginalized communities, supporting MSMEs, and advancing projects like renewable energy.

During the Union Budget FY25, the Finance Minister introduced a special package designed to support MSMEs through financing, regulatory changes, and technology assistance. This package aims to help MSMEs grow and compete on a global scale.

At the same FIBAC event, RBI Governor Shaktikanta Das also highlighted the financial sector’s pivotal role in supporting MSMEs. He urged banks and financial institutions to develop tailored financial products and services specifically catering to MSME needs. These products, Das noted, could help MSMEs expand, increase productivity, and contribute to job creation.

Nagaraju also stressed the importance of digital infrastructure in enabling the banking sector to reach the last member of society. He highlighted the potential of fintech in expanding financial inclusion while cautioning against the growing risk of cyber threats. He also spoke about the need for green financing and improving infrastructure projects in India. With infrastructure demands multiplying and existing systems aging, he said that investment in better infrastructure is crucial for the country’s future.

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