MSMEs should strive for greater credit discipline which starts with careful selection of the appropriate credit product suited to their requirements and cash flows, according to Swaminathan J, Deputy Governor, Reserve Bank of India. He noted in a latest speech that MSMEs should prioritise formalisation. Many MSMEs operate informally, making it challenging for lenders to assess their creditworthiness due to information asymmetry, particularly regarding their financial performance. By registering on the Udyam Portal and filing GST returns, MSMEs can enhance the transparency over their level of business activity and financials. This will enhance their credibility and may qualify them for priority sector lending and government schemes, by reinforcing their trustworthiness in the eyes of financial institutions.
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