By Dr. Mohit Rana, CEO, Infomerics Analytics & Research
India has made significant strides in digitising payments, strengthening financial infrastructure and expanding access to digital business tools. Yet, for millions of micro, small and medium enterprises (MSMEs), access to timely and affordable credit remains a persistent challenge. Despite progress in digital finance, the gap between credit demand and formal lending continues to constrain the growth of smaller businesses.
According to a report released at the Global Fintech Fest by Bain & Company and NPCI Bharat BillPay Limited (NBBL), titled India's Next Growth Frontier: B2B Commerce, Payments, and Credit, India's MSME sector faces a formal credit gap exceeding â¹60 lakh crore, or approximately $720 billion. This highlights a fundamental challenge: while digital payments have become increasingly accessible, the systems governing business transactions, receivables and credit assessment remain fragmented.
For smaller enterprises operating with limited working capital, delayed payments and restricted access to institutional finance can affect daily operations, business expansion and participation in larger supply chains.
Understanding the scale of the credit gap
The report highlights a considerable imbalance between credit demand and formal lending supply. Total debt demand stands at approximately â¹92 lakh crore, while formal credit supplied is estimated at around â¹34 lakh crore, leaving a gap of nearly â¹60 lakh crore.
Micro and small enterprises are disproportionately affected. Traditional institutional lending channels meet only 30% to 40% of their total credit demand, leaving many businesses struggling to secure adequate financing.
A key reason is the continued reliance on conventional credit assessment models. Smaller businesses often lack substantial physical collateral, extensive financial histories or the documentation required to satisfy traditional underwriting criteria. Consequently, enterprises with genuine business activity and revenue potential may struggle to access formal credit, pushing some towards higher-cost informal financing.
Bridging this gap requires more than increasing loan availability. It calls for improvements in how lenders assess business performance, verify transactions and evaluate creditworthiness.
Delayed payments continue to constrain working capital
Access to credit is only one part of the challenge. For many MSMEs, receiving timely payments for goods and services already delivered is equally critical.
An estimated â¹8 lakh crore in receivables owed to MSMEs remains locked due to payment delays. These are often triggered by information mismatches, including unconfirmed delivery notes, discrepancies in purchase orders and fragmented communication between buyers and sellers.
For a smaller enterprise, an unpaid invoice can create an immediate working capital constraint. Businesses must continue meeting expenses such as salaries, procurement and transportation even when payments remain outstanding. Delayed receivables can therefore affect production schedules, order fulfilment and investment in growth.
The problem is compounded by administrative inefficiencies. Corporate finance teams across India spend an estimated 30% to 40% of their bandwidth on routine tasks, including manual invoice matching, payment reconciliation, exception handling and follow-ups. These processes consume valuable time, increase the likelihood of errors and delay the movement of funds across supply chains.
Addressing these inefficiencies is essential to improving liquidity and enabling smaller enterprises to operate more effectively.
Building an interoperable digital infrastructure for B2B trade
A potential solution lies in developing a centralised, interoperable digital ecosystem that connects businesses, lenders, payment providers and public databases through standardised application programming interfaces (APIs).
As proposed by Bain & Company and NBBL, such a framework would connect enterprise resource planning (ERP) systems, commercial banks, non-banking financial companies (NBFCs), payment providers and databases such as the Goods and Services Tax Network (GSTN), enabling relevant information to flow more seamlessly.
The objective is to improve visibility across the business transaction lifecycle, from purchase orders and delivery confirmation to invoicing, payment reconciliation and credit assessment.
Automated invoice reconciliation could help resolve discrepancies faster and reduce administrative workloads. Connecting India's more than 20 crore monthly GST e-invoices with business workflows could support more efficient order-to-cash processes and improve visibility into outstanding payments.
Equally important is the opportunity to strengthen credit assessment through verified transaction data. Buyer-confirmed invoices can serve as verifiable digital assets, allowing lenders to evaluate business cash flows and transaction histories rather than relying predominantly on physical collateral. Such cash-flow-based underwriting could help viable smaller enterprises access formal finance while enabling lenders to make better-informed decisions.
Artificial intelligence (AI) and advanced analytics could further strengthen this framework through real-time cash-flow intelligence, dynamic risk scoring and automated credit underwriting. However, their effectiveness will depend on the quality, reliability and interoperability of the underlying data, alongside successful integration into existing business workflows.
The larger economic opportunity
India's formal business sector generates more than â¹130 lakh crore in economic activity and contributes approximately 45% of the country's Gross Value Added (GVA). Improving credit access and reducing friction in business transactions could therefore have implications extending well beyond individual enterprises.
When MSMEs receive payments on time and gain access to affordable finance, they are better positioned to manage working capital, fulfil orders, invest in operations and pursue new opportunities. More efficient transaction systems can also reduce administrative costs and improve capital movement across supply chains.
For financial institutions, reliable business transaction data could create opportunities to serve enterprises underserved by conventional lending models. For the wider economy, stronger MSME financing mechanisms could encourage greater participation in formal commerce and improve supply chain resilience.
Bridging India's â¹60 lakh crore MSME credit gap will require coordinated efforts across lenders, technology providers, businesses and the broader financial ecosystem. Digitising payments has established an important foundation, but the next phase must focus on connecting the systems that govern business transactions, working capital and credit delivery.
As India advances towards its vision of Viksit Bharat, ensuring that MSMEs have access to timely payments, reliable digital infrastructure and appropriate financing will be critical. Empowering these enterprises is not merely about closing a credit deficit; it is an essential step towards building a more efficient, inclusive and resilient economy.
