FM asks RRBs to develop suitable products aligning with MSME clusters

Union Finance Minister Nirmala Sitharaman
| Photo Credit: ANI

Finance Minister Nirmala Sitharaman urged Regional Rural Banks (RRBs) and sponsor banks to develop suitable products aligning with MSME clusters to further increase banking penetration and financial inclusion across the country.

She was speaking at a review meeting, held in connection with National MEME cluster Outreach Programmes here on Saturday, with chairpersons of RRBs and CEOs of their sponsored banks.

The Finance Minister emphasised active outreach by the RRB branches located in MSME clusters to ensure credit to small and micro enterprises in areas like textile, wooden furniture, leather, food processing, packing materials and engineering and machine tools. “These areas hold immense potential for increasing the loan portfolio of RRBs to MSMEs,’‘ she observed.

According to Ms. Sitharaman, all RRBs should have their own updated technology stack to stay relevant especially when digital and mobile banking service are already boosting financial access to regions such as northeastern states and hilly regions, with limited physical connectivity.

Focus on asset quality

However, she also cautioned sponsor banks and RRBs to recognise the challenges ahead and urged to continue focusing on maintaining asset quality, expanding digital services, and ensuring robust corporate governance.

She further urged RRBs to put greater thrust on the clear identification of beneficiaries while sanctioning loans under various schemes like PM Vishwakarma and PM Surya Ghar Muft Bijli Yojana etc. RRBs were also asked to increase credit disbursement in ground-level agriculture.

‘’There should be focus on scaling up agriculture credit disbursement with special focus on allied agriculture activities like dairy, animal husbandry, fisheries,’‘ she stressed.

Bank performance review

Earlier in the day, the Finance Minister also reviewed the financial performances of 10 RRBs and public sector banks across Karnataka, Tamil Nadu, Andhra Pradesh, Telangana and UT of Puducherry.

SIDBI’s branches across Karnataka have a portfolio of ₹1,169 crore with virtually no NPAs. This is a big advantage for the MSMEs, he post on X said.

Some 20 industrial clusters would get covered with the opening of six new branches of SIDBI & it would help strengthen MSMEs in Karnataka.

Speaking on the occasion, Union Minister of State for Finance Pankaj Chaudhary called upon banks to give maximum thrust to make their financial inclusion schemes successful.

E-commerce trade hubs were also being set up with private partnership. These would facilitate international trade and export-related services, he said.

For Cabinet approval

Union Finance Minister Nirmala Sitharaman said the ₹100 crore credit guarantee scheme for MSMEs announced during the Budget this year would be soon placed before the Union Cabinet for approval.

Highlighting the five announcements that was made in the budget for MSMEs, she said, that “the introduction of a special credit guarantee corpus to help MSMEs will be very helpful during the time of distress.”.

A ₹100 crore credit guarantee scheme will soon be placed before the cabinet. Immediately after getting approval from cabinet, the scheme that will provide guarantee through MSME ministry and banks will be implemented,” she said at National MSME Cluster Outreach Programme.

According to Finance Minister, with this, MSMEs that are exploring loans from banks wont require a third party guarantee and collateral. “The government gives you the guarantee power of ₹100 crore, then public sector banks will develop a new credit assessment model.”