Repo rate cut by RBI will making loans cheaper for MSMEs

How will the RBI’s recent repo rate cut help MSMEs access affordable credit, and what steps should they take to make the most of it?

The recent repo rate cut by the RBI will reduce banks' lending rates, making loans cheaper for MSMEs. This will help MSMEs manage their cash flow better and invest in day-to-day operations, technology, or expansion. To benefit, MSMEs should ensure that their financial records are updated and audited. They must check their credit score and work on improving it, if required. Businesses should also approach different lenders to compare loan offers and negotiate better terms. MSMEs can also refinance existing high-interest loans at lower rates. Preparing a clear business plan with realistic projections will increase their chances of approval. By acting early, MSMEs can make the most of lower credit costs and grow sustainably.

With the new MSME classification limits revised in April 2025, how can growing businesses plan their investments without losing MSME benefits?

The revised classification allows businesses to grow while staying within the MSME category. However, firms need to plan investments carefully to retain the benefits linked with MSME status. Businesses should regularly monitor their capital investment and annual turnover against the new limits. Strategic planning of equipment or infrastructure purchases across financial years can help avoid sudden jumps in classification. In some cases, separating business units or verticals into independent legal entities may also help manage compliance. It is advisable to consult financial and legal advisors before making major changes. Companies should also stay updated with the government circulars and maintain proper documentation. This approach allows businesses to grow while still enjoying benefits like priority lending and subsidy eligibility.

States like Kerala are moving MSME services online, such as professional tax payments through KSWIFT. How important is digitisation for MSME compliance and ease of doing business?

Digitisation makes business processes faster, easier, and more transparent for MSMEs. Online platforms like Kerala’s KSWIFT help businesses complete compliance tasks such as paying taxes and filing documents without physically visiting government offices. This saves time and reduces errors. MSMEs should start by adopting digital tools for accounting, tax filing, and document storage. Training employees to use these tools and platforms is equally important. Digitisation also helps in applying for loans, submitting tenders, and accessing government schemes. It builds a proper financial trail, which can be useful when applying for credit or undergoing audits. As more states roll out such online systems, MSMEs that adapt early will find it easier to grow and compete effectively in a digital economy.

The government has announced concessional steel for export-focused MSMEs, but the uptake has been low. What might be stopping MSMEs from using such schemes?

Despite being a useful scheme, concessional steel for export-focused MSMEs has seen low adoption. This may be due to limited awareness about the scheme’s availability, eligibility conditions, and application procedures. Mane MSMEs lack the time or resources to track and apply for such support. The application process may involve complex documentation or coordination with multiple agencies. Another barrier could be the inability to match the concessional steel supply with urgent production schedules, especially in export-driven operations. To address this, MSMEs should appoint a person or team to monitor government schemes. Trade bodies and industry associations should also run awareness drives. Streamlining the process and providing more clarity can encourage MSMEs to participate and benefit from such schemes.

Infrastructure projects like the JET City hub in Andhra Pradesh are being revived for MSMEs. What support systems are needed to make these manufacturing clusters successful?

For MSME-focused hubs like JET City to succeed, several support systems must be in place. First, the cluster must have strong physical infrastructure like electricity, water, roads, and transport. Shared facilities like testing labs, warehouses, and quality control units can help smaller firms reduce costs. A single-window approval system is needed to handle regulatory requirements quickly. Access to banks, credit institutions, and advisory services within the hub makes financial management easier. Skilling centres and training institutes will help create a trained workforce. Marketing and export support through government trade cells will also benefit businesses. Overall, combining physical infrastructure with financial, technical, and regulatory support can help MSMEs thrive within such industrial clusters.

A new Rs 200 crore technology centre for MSMEs is coming up in Coimbatore. How can MSMEs use such centres to upgrade their tech and improve efficiency?

The new technology centre in Coimbatore will give MSMEs access to modern tools, equipment, and technical know-how. MSMEs can use the facility to test new products, conduct quality checks, and improve production methods. Training workshops will also help workers learn about automation, digital systems, and better processes. MSMEs should first identify areas where technology can improve productivity, reduce waste, or cut costs. Then, they can visit the centre to explore solutions. These centres also promote collaboration with technical experts and other businesses, which can lead to shared R&D. MSMEs should treat the centre as a long-term resource to solve problems, improve competitiveness, and prepare for larger contracts in domestic or global markets.

With credit guarantees and MSME credit cards being pushed through recent budget changes, how should MSMEs prepare to access and use these financial tools effectively?

To access credit guarantees and MSME credit cards, businesses must first be registered with UDYAM and maintain clean financial records. They should monitor their credit score and repay any pending dues. Before applying, MSMEs need to prepare documents such as income statements, cash flow forecasts, and a business plan. Understanding the interest rates, repayment timelines, and terms of the credit card or guarantee is important. MSMEs should also compare offerings from different banks and choose products that match their cash flow needs. Once the card or credit is sanctioned, it must be used responsibly. Regular monitoring, timely repayments, and proper documentation will help MSMEs use these tools to improve liquidity and working capital efficiency.

EoM.