The Federation of Indian Micro and Small and Medium Enterprises (FISME) has raised major concerns regarding the Reserve Bank of India’s (RBI) draft guidelines—the ‘Draft RBI (NBFCs – Credit Facilities) Amendment Directions, 2026’—which propose a complete ban on Non-Banking Financial Companies (NBFCs) offering revolving credit products.
FISME warns that prohibiting these flexible credit facilities could severely choke working-capital financing for MSMEs across India.
Key Draft Proposal & Industry Concerns
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The RBI Proposal: Under the proposed norms issued in August 2026, the RBI mandated that “NBFCs shall only offer credit products which are in the nature of term loans and shall not offer any revolving credit products.” Stakeholder feedback has been requested until August 28, 2026.
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Regulatory Intent: The RBI aims to curb opaque lending practices, hidden borrower stress, indefinite rollovers, and predatory app-based consumer lending.
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FISME’s Counter-Argument: While acknowledging regulatory concerns, FISME highlighted that productive working capital for enterprises is fundamentally different from consumer convenience credit. Eliminating revolving credit entirely penalizes legitimate businesses managing short-term liquidity gaps.
Impact on MSMEs & Expert Insights
| Stakeholder / Expert | Key Observation & Impact |
| FISME (Anil Bhardwaj) | Called for targeted conduct/risk regulations, underwriting controls, and data governance rather than a blanket ban on revolving credit. |
| PwC India (Ranen Banerjee) | Noted that revolving limits allow MSMEs to pay interest only on drawn amounts without reapplying for term loans. However, noted impact may be manageable as NBFCs account for ~10–11% of total credit. |
| Getfive Funds (Shrikant Goyal) | Highlighted that MSMEs face long payment receivables (weeks after sales) while needing immediate cash for wages and raw materials. A ban causes short-term liquidity stress, though it might enforce stricter long-term cash discipline. |
Importance of the MSME Sector
The MSME sector remains a critical engine of India’s economy, making the availability of flexible liquidity crucial:
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31% of India’s Gross Domestic Product (GDP)
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~35% of India’s manufacturing output
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~50% of India’s total merchandise exports
