Hyderabad, Nov 25 (PTI) MSMEs operating informally can boost their credibility by registering on the Udyam portal, RBI Deputy Governor Swaminathan J said.

While regulatory policies and government programs have played a crucial role in creating an enabling environment for MSMEs, it is equally important for micro, small and medium enterprises (MSMEs) to take proactive steps to build trust and improve their visibility with lenders, he said.

The Deputy Governor was speaking here on November 16 at the CEO Forum of the Federation of Telangana Chambers of Commerce and Industry.

Addressing the gathering, he said that despite the critical role of the MSME sector in the Indian economy, a common complaint we hear from this segment is that it is difficult for them to obtain adequate formal credit and in a timely manner.

This challenge may be due to factors such as information asymmetry on their finances and business viability, as well as limited formalization even today within the MSME sector, he said. declared.

The Deputy Governor made four suggestions to MSMEs for better access to finance as well as to improve their financial health.

One of the suggestions to MSMEs was to embrace formalization.

MSMEs should prioritize formalization, Swaminathan said, while noting that many MSMEs operate informally, making it difficult for lenders to assess their creditworthiness due to information asymmetry, in particularly with regard to their financial performance.

“By registering on the Udyam portal and filing GST returns, MSMEs can improve transparency in their level of business activity and finances. This will enhance their credibility and could qualify them for priority sector loans and government programs, enhancing their trustworthiness in the eyes. financial institutions,” he said.

The senior RBI official also said MSMEs should maintain complete and accurate financial records, which is essential in seeking credibility with lenders. MSMEs must also adopt appropriate accounting practices, ensuring that their financial documents, such as income statements, balance sheets and cash flow statements, are accurate and reliable.

Along with formalization, he said, adoption of digital payment systems such as UPI and online banking creates a digital footprint of financial transactions, making it easier for lenders to assess financial data of the company.

Digital payments also improve cash flow management, giving MSMEs greater control over their finances and helping them maintain a clear financial record.

Other suggestions included credit discipline, capacity building and the use of TReDS.

“Developing the MSME sector requires the collective effort of all stakeholders: government, regulatory bodies, financial sector, trade associations and even large companies.

“Despite its central role in economic growth, the sector faces numerous challenges, including payment delays, infrastructure constraints, limited access to formal financing, low technology adoption and labor shortages. “qualified work,” he said.

The RBI has taken significant steps to address these issues, by promoting financial inclusion, facilitating access to credit and advocating for digitalization, the deputy governor said.

While the RBI and the government have established a robust policy framework, including priority sector lending, collateral-free lending, digital platforms like TReDS and capacity building initiatives, it is equally important that MSMEs make the most of take advantage of these opportunities.

Going forward, sustained collaboration between all stakeholders will be crucial to ensure the continued growth and resilience of this vital sector, he added.