Addressing MSME entrepreneurs in Kochi ahead of MSME Day, Malhotra said the RBI has introduced a series of regulatory and facilitative measures over the years to expand access to finance for the sector. He stressed that financial institutions need to make fuller use of the digital infrastructure being built around lending.
Malhotra highlighted that the aspiration of Viksit Bharat cannot be achieved without ensuring adequate financial support for MSMEs, which contribute 31 per cent of GDP, account for around 35 per cent of manufacturing output and nearly half of India’s merchandise exports, while supporting the livelihoods of more than 320 million people.
“We believe that a financial system that does not serve its smallest, most numerous participants well is not truly serving the economy well,” he said.
Drawing a parallel with the Unified Payments Interface (UPI), Malhotra said ULI has the potential to fundamentally change how credit is accessed.
“If I may draw an analogy that will resonate with many of you: just as UPI transformed how this country moves money — instantly, digitally, and without friction — we believe that Unified Lending Interface has the potential to do the same for how this country accesses credit,” he said.
ULI allows lenders to assess borrowers using digitally available information such as GST filings, bank statements, utility records and land records through a single consent-based interface.
“For an enterprise with a thin credit history but a genuinely strong business, this is transformative. It allows you to be judged on the true, current state of your business, quickly and with far less friction,” Malhotra said.
He also highlighted that the AA framework facilitated lending of Rs 3.5 trillion during FY26 and has the potential to scale up significantly.
He said the RBI’s regulatory measures, coupled with government schemes such as MUDRA and CGTMSE, have contributed to a significant rise in formal credit to the sector.
“Credit outstanding by scheduled commercial banks to the MSME sector stood at Rs 36.79 trillion as on December 31, 2025, with a healthy CAGR of around 15 per cent during the past five financial years,” he said.
“While considerable progress has been made, I would not stand here and say that we have covered the credit gap. We have not. But I would certainly say that we have made considerable progress in meeting the financing needs of the MSME sector in the last few years,” he said.
The RBI Governor also urged lenders to fundamentally reorient their approach towards MSMEs.
“MSMEs should not be considered a regulatory obligation alone, but as long-term business partners whose sustained growth generates durable financial returns and broad social value,” he said, adding that relationship banking, deepened and informed by digital data, can be a powerful and humanising complement to technology-led credit delivery.
Addressing entrepreneurs, Malhotra urged them to invest in technology, innovation, and research and development, while making greater use of platforms such as TReDS, ULI, the Account Aggregator framework and co-lending arrangements. He also urged MSMEs to register under Udyam Registration, saying the benefits of government schemes are available only to registered units.
Reiterating the central bank’s commitment to the MSME sector, Malhotra said the RBI would continue working with stakeholders to improve access to finance. “As for the Reserve Bank, our commitment to you is equally simple: We will continue to build the rails, reduce the friction, and stay in the room with you as this sector grows,” he said.