NITI Aayog Proposes Credit Support for Medium Enterprises to Bridge Financing Gaps

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Medium Enterprises Latest News

The NITI Aayog, government’s policy think tank, has recommended the introduction of a dedicated financing scheme to allow medium enterprises to avail loans at concessional rates.

Medium enterprises (MEs) represent a crucial but often overlooked segment of India’s economic fabric.
Despite contributing significantly to exports and employment, they face persistent challenges in accessing affordable credit.
In response, NITI Aayog has released a comprehensive report recommending policy interventions to ease financial constraints and strengthen the sector’s growth trajectory.

India’s MSME sector, comprising Micro, Small, and Medium Enterprises, contributes about 29% to the country’s GDP and employs over 60% of its workforce.
While micro enterprises make up 97% and small enterprises 2.7% of registered MSMEs, medium enterprises form only 0.3%.
However, this small segment is responsible for nearly 40% of MSME exports, underlining its strategic importance in driving India’s industrial competitiveness and export performance.

According to the NITI Aayog report titled “Designing Policy for Medium Enterprises”, the sector faces a credit gap of $10 billion (as of 2024), primarily due to structural and institutional barriers.
Medium enterprises typically receive fewer priority sector loans than micro units and face borrowing costs that are approximately 4% higher than large corporations.
Moreover, only 8 of the 18 MSME government schemes cater to medium enterprises, and just 17.81% of total funds are allocated to them.
This has exacerbated funding constraints, leaving MEs without sufficient working capital support.

Dedicated Working Capital Financing Scheme
- NITI Aayog has suggested a sector-wise financing scheme based on enterprise turnover, with loans capped at ₹25 crore, and a maximum of ₹5 crore per individual request.
- The scheme would be managed by the Ministry of MSME and aim to provide timely and flexible funding for manufacturing and services units.
Medium Enterprise Credit Card
- To address urgent liquidity needs such as payroll, inventory purchases, and equipment repair, a medium enterprise credit card facility with a ₹5 crore limit has been proposed.
- The interest rates would align with market norms but include a grace period for repayment.
Faster Fund Disbursal Through Retail Banks
- The report advocates the involvement of retail banks for quicker fund distribution, under the supervision of the MSME ministry.
- This would cut bureaucratic delays and ensure timely credit access.

Apart from financial constraints, medium enterprises struggle with several non-financial challenges:
- Low adoption of advanced technologies
- Inadequate R&D support
- Lack of sector-specific testing infrastructure
- Mismatch between training programmes and actual enterprise needs
These factors hinder scalability and innovation potential within the segment.

To improve access to government resources, NITI Aayog recommends developing a dedicated sub-portal under the existing Udyam platform. This portal would include:
- Scheme discovery tools
- Compliance support
- AI-driven navigation assistance for enterprises
Additionally, it calls for the integration of medium enterprise-specific modules into skilling and entrepreneurship training, aligned with regional and sectoral demands.

The report underscores that unlocking the potential of medium enterprises demands an inclusive and coordinated policy framework.
Strategic interventions in financing, skilling, digital access, and infrastructure are essential to harness the segment’s full capabilities.
By enabling greater ease of doing business and removing systemic credit bottlenecks, India can position its medium enterprises as powerful drivers of export growth, employment, and self-reliance in the global economy.