Sidbi and banking sector urged to align MSME financing with business cycles, export patterns, and sector-specific cash flows

Finance Minister Nirmala Sitharaman on Monday called on the Small Industries Development Bank of India (Sidbi) and the banking system to introduce customised credit structures for MSMEs instead of relying on uniform lending models.

Addressing Sidbi’s Foundation Day event, Sitharaman said that “Standard products cannot serve non-standard businesses.” She stated that financing structures should be designed according to the specific business cycles of enterprises across sectors.

“A farmer-linked enterprise does not earn every month. A resort does not earn evenly throughout the year. Agri-exporter waits for payment after shipment. A small auto-component supplier waits for invoice clearance. A woman entrepreneur may have regular transactions yet no property in her name. Then why should all of them be given the same repayment structure?” she said.

She further said that credit systems must be aligned with enterprise-specific business cycles. For agri-processing MSMEs, she suggested linking repayments to harvest cycles. Textile exporters, she noted, require financing aligned with export cycles, while tourism businesses need repayment schedules suited to seasonal earnings.

“The aim should be to provide right credit for the right enterprise and at the right time for the right purpose,” Sitharaman said.

The Finance Minister also asked Sidbi to expand its role beyond traditional lending functions. “Sidbi should stop being in the comfort zone of saying, ‘I am a lender to small enterprises’,” she said. “You are now going to be the market-maker. You are now going to be the risk-sharing partner for all MSMEs and for the entire startup ecosystem.”

Sitharaman additionally urged Sidbi to strengthen the venture debt ecosystem for startups and expand cash flow-based lending and digital lending partnerships, particularly for first-time borrowers.

She also highlighted delayed payments as a key issue for MSMEs, stating that around ₹8.1 trillion remained locked in dues. According to her remarks, the government regularly reviews payment timelines of central public sector undertakings to ensure MSME dues are cleared within the mandated 45-day period.

Linking MSME financing to the wider economy, Sitharaman said over 320 million Indians were employed in and through the MSME ecosystem. “If we get MSME credit right, we get the Indian middle class right. If we get the Indian middle class right, we get Viksit Bharat right,” she said.