RBI Deputy Governor Advocates Digital Empowerment for MSMEs

Deputy Governor Swaminathan J of RBI emphasized leveraging digitization in the financial sector to boost MSME exports. Speaking at the Annual Day of the Foreign Exchange Dealers, he urged banks to adopt digital tools for better financing solutions and highlighted the need for financial literacy among MSMEs.

Deputy Governor Swaminathan J of the Reserve Bank of India (RBI) accentuated the importance of digitization in credit delivery to support Micro, Small, and Medium Enterprises (MSMEs) during his address at the Annual Day of the Foreign Exchange Dealers on Thursday.

Swaminathan J pointed to the adoption of digital payment systems by MSMEs as a significant opportunity, urging bankers to explore these avenues. He stated that tailored and focused financial services such as pre-and post-shipment finance, factoring, and invoice discounting could notably aid in enhancing MSME exports.

Highlighting the traction towards end-to-end digitalization in credit delivery, particularly in the retail and MSME sectors, the Deputy Governor encouraged further exploration of digital transactions with MSMEs to expedite approvals and reduce costs. He also emphasized the need for a better risk assessment system, leveraging the data footprints from digital transactions.

Swaminathan J stressed the importance of understanding MSME cash flows, considering delayed payments to ensure proper working capital cycles and adequate financing. Pointing out the lack of financial management skills among small business owners, he underscored the sector's role in risk management through export credit insurance and currency risk hedging.

The Deputy Governor called for a nuanced approach in assessing financial discipline, given MSMEs' challenges such as low capital, cash flow constraints, and external pressures. He concluded by emphasizing the need to improve financial literacy among MSMEs to facilitate their growth.

(With inputs from agencies.)