In a pre-budget meeting with finance minister Nirmala Sitharaman on Wednesday, MSMEs flagged issues related to credit flow, temporary mismatch in cash flows leading to classification of loans as NPA and Quality Control Orders (QCOs) hurting MSMEs, sources said. Sitharaman chaired the third pre-Budget consultation with the stakeholders from MSMEs in connection with the forthcoming Union Budget 2026-27.
MSMEs have raised concerns over persistent challenges in credit flow, loan classification norms, and new regulatory measures that are straining their operations. Industry representatives have urged the government to take corrective steps to address liquidity issues and policy hurdles impacting the sector’s growth.
MSMEs have flagged that despite several government and the Reserve Bank of India initiatives to improve credit availability, access to timely and adequate finance remains a major pain point.
This has led to cash flow pressures, particularly for enterprises dependent on seasonal demand or delayed payments from large buyers.
The MSME representatives have also highlighted that temporary cash flow mismatches often result in their loans being classified as non-performing assets (NPAs) under existing prudential norms. They have called for a more flexible and realistic approach to NPA recognition for MSMEs, suggesting that short-term financial stress should not automatically trigger an NPA tag, which adversely affects creditworthiness and access to future financing.
In addition, MSMEs have voiced concern over the growing number of QCOs introduced across various product categories. While intended to promote quality and safety standards, MSMEs say these mandatory certification requirements have increased compliance costs and created operational hurdles, especially for small manufacturers with limited resources to meet the standards or testing norms within tight timelines.
The sector has previously urged the government to adopt a phased or capacity-based implementation of QCOs and to simplify certification procedures for smaller enterprises.
MSMEs, which contribute nearly 30% to India’s GDP and employ over 110 million people, play a pivotal role in sustaining industrial growth and exports.
Experts have cautioned that unresolved financing bottlenecks and regulatory burdens could slow down momentum in the sector, and seek targeted policy interventions in the upcoming budget to ease compliance and ensure smoother credit flow.