SIDBI and Regional Rural Banks to Widen Co-Lending for MSMEs

The Small Industries Development Bank of India (SIDBI) and Regional Rural Banks (RRBs) are preparing to broaden their co-lending framework, aiming to strengthen credit delivery for micro, small and medium enterprises (MSMEs) in rural and semi-urban regions.

The proposed expansion was the central theme of a conclave in New Delhi, attended by the heads of all 28 RRBs and chaired by Sanjay Lohiya, Secretary of the Department of Financial Services. The discussions focused on combining SIDBI's specialised knowledge of MSME financing with the extensive branch network of RRBs in smaller towns and villages.

Under the model, RRBs are expected to diversify their loan portfolios by increasing MSME exposure. The use of rule engine-based underwriting is intended to safeguard asset quality. The Department of Financial Services has urged RRBs to treat MSME lending under this arrangement as a key branch-level target.

A significant component of the initiative is SIDBI's Co-Lending Origination Platform, a fully digital system designed to make the lending process faster and paperless. The platform enables applicants to receive in-principle sanctions quickly after submitting details, with digital documentation and direct bank transfers eliminating the need for branch visits.

The pilot phase, implemented at three RRBs, has reportedly shown encouraging results. The expansion to additional RRBs is expected to address credit gaps, particularly for micro and small enterprises. SIDBI CMD Manoj Mittal encouraged RRBs to participate actively in the programme.

The conclave also underscored the importance of using MSME cluster data to identify more businesses and leveraging RRB networks to support India's next-generation manufacturing ecosystem. Enhancing financial awareness among MSMEs, including through participation in state-led Rozgar Melas, was also highlighted as a priority.