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Informist, Tuesday, Aug. 11, 2026

 

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--SBI MD Tewari: Can't compromise on underwriting standards for MSME loans
--CONTEXT: SBI MD Ashwani Kumar Tewari speaking at FIBAC 2026
--Bandhan Bank MD: MSMEs need easier access to guarantee schemes
--CONTEXT: Bandhan Bank MD Sen Gupta speaking at FIBAC 2026 
--Tata Capital MD: Need more players to deliver credit in order to meet demand
--CONTEXT: Tata Capital MD Rajiv Sabarwal speaking at FIBAC 2026
 

 

MUMBAI – Banks cannot compromise on underwriting standards while expanding credit to micro, small and medium enterprises, even as significant unmet demand for MSME loans remains, according to State Bank of India Managing Director Ashwani Kumar Tewari. "There remains a historical legacy because these are vulnerable units," Tewari said at the Financial Institution Benchmarking and Calibration seminar. 

 

While government guarantees, digital data and other lending infrastructure have helped boost MSME credit, lenders need to ensure that the availability of guarantees does not lead to a dilution of underwriting standards, he said. "Giving guarantees has given a very good boost, but are we kind of compromising the underwriting itself by just thinking that there is a guarantee available so we'll just have some model to get through is something which we have to be very cognizant of," Tewari said.

 

He said banks must continue to follow their regular underwriting processes, supplemented by digital data, while strengthening collection and bankruptcy mechanisms for MSME borrowers. MSMEs, particularly smaller businesses, often have thin data flows and may require a physical interface for lending and collections, Tewari said. Historically, credit costs for the segment had been high, he said, pointing to the risks associated with MSMEs.

 

The comments came as lenders and financial institutions discussed how to address a significant MSME credit gap. Tewari earlier highlighted that more than 90% of MSMEs are micro enterprises, often characterised by thin equity, limited financial data and a lack of credit history. Of around 63 million Udyam-registered entities cited during the discussion, only about 15% were active in terms of credit facilities, indicating substantial latent demand.

 

Tata Capital Managing Director Rajiv Sabarwal said the inability of existing lenders to meet demand indicates the need for more institutions and lending models. "We need more supply or more players to come in and more models to emerge for that credit demand to be met," Sabarwal said. He added that there was a need to focus on bringing new customers into the formal credit system rather than merely taking over existing borrowers from other lenders.

 

Sabarwal said technology and alternative data could help lenders reach a wider pool of MSMEs, while emphasising the importance of bringing information available through various sources into regulated channels. He also said MSME borrowers require multiple financial products and not just term loans.

 

Bandhan Bank Managing Director Chandra Shekhar Ghosh said guarantee schemes need to be made easier and more seamless for lenders to use. The banking industry has already suggested simplifying the claims process so that guarantee mechanisms can be used more effectively, he said. Ghosh also said the existing financial infrastructure, including banks, non-bank financial companies, small finance banks and microfinance institutions, should be allowed to expand while new institutions should be encouraged to enter the market. Greater competition would help increase supply and eventually bring down margins, he said.

 

The panel also discussed the role of digital public infrastructure, goods and services tax data, account aggregators, the Trade Receivables Discounting System and alternative data in expanding MSME lending. Tewari said only about 10 million of the roughly 90 million MSMEs are GST registered, leaving a large number of "thin file" borrowers for whom conventional data is unavailable.

 

He said alternative information such as power consumption, vehicle ownership and mobile phone usage could be routed through credit bureaus to create credible data sets for underwriting. However, such models are still at an early stage because sufficient historical default data is not yet available.

 

The discussion also highlighted the need for responsible lending, risk-based pricing and stronger borrower protection, with panellists saying that the expansion of MSME credit must be accompanied by better collection, bankruptcy and risk-management frameworks.  End

 

Reported by Kabir Sharma and Pratiksha

Edited by Saji George Titus

 

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