IT Minister urges banks to create UPI-like platform for easy credit to MSMEs

Union Minister Ashwini Vaishnaw has urged banks in India to create a digital platform that is as powerful as a unified payments interface (UPI) for providing quick credit to micro, small and medium enterprises (MSME) in India. Vaishnav, the Union Minister of Railways and Communications and the Ministery of Electronics & Information Technology (MeitY), was speaking at the MeitY's Azadi Ka Digital Mahotsav: Digital Payments Utsav event in New Delhi on December 5.

"Can we create a platform as powerful, as good, as seamless and as digital as the UPI platform for providing very quick and easy credit to the MSMEs and people who are at the bottom of the pyramid,” he said.

“I don't know what the challenges are. I don't know how difficult or easy that is. But you have today a very good ecosystem of Aadhar, mobile phones, UPI (unified payments interface) and DigiLocker. Practically everything that you need to create it is there,” he added.

He asked bankers to work on the challenge over the next three months and come up with concepts to create such a platform. “For the next three months, work on it and come back. I'll be very happy to spend one full day with you to look at the concepts that you bring,” he added.

According to a June 2021 report by the Association of Chartered Certified Accountants (ACCA), MSMEs in India are starting at a credit gap of almost $380 billion, as per a World Bank estimate. The report further states that banks are cautious about lending businesses “due to poor demand, market uncertainties, and the high-risk profile of the sector", highlighting the glaring problem of credit shortage that the Union Minister wants to address with a unified digital platform built by banks.

MSMEs form the second-largest employment generator in India after agriculture and accounts for 30% of the country’s GDP in 2019-20, according to data released by the Press Information Bureau (PIB) in August this year. However, the sector suffered huge losses due to lockdowns and is still facing a liquidity crunch, despite the fact that in May 2020, the government of India had announced a package of Rs 3 lakh crore to provide support to MSMEs. 

In 2018, Prime Minister Narendra Modi had launched a loan portal to facilitate easy access to credit for MSMEs in 59 minutes. As per the latest data shared by the MSME Ministry in February 2021, a total of 2,06,433 loans amounting to Rs 58,044 crores have been disbursed through the portal.