RBI proposal to curb NBFCs' revolving credit may choke MSME funding, says industry body FISME
The Federation of Indian Micro and Small & Medium Enterprises (FISME) has urged the RBI to reconsider its proposal to prohibit NBFCs from offering revolving credit. FISME warns that a blanket ban could severely disrupt working capital finance for MSMEs, which rely on such credit to manage cash flow gaps.
What this means
This proposal from the RBI indicates a potential tightening of regulatory oversight on NBFC lending practices, particularly concerning the structure of credit products. Eliminating revolving credit could force NBFCs to restructure their offerings, potentially reducing flexibility for MSMEs and altering the competitive landscape between banks and NBFCs for this segment.
Most affected: NBFCs, MSMEs, Small business lending
Key takeaway: NBFCs should closely monitor RBI's final guidelines on revolving credit and prepare for potential product restructuring to maintain MSME client relationships.
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