Industry body pushes for relaxed NPA norms, higher MSME lending limits

The PHD Chamber of Commerce and Industry (PHDCCI) has urged the government to extend the non-performing asset (NPA) classification window to 180 days for micro, small and medium enterprises (MSMEs) in its pre-Budget proposals for fiscal year 2027-28.

The industry body has recommended the extended timeline to provide struggling businesses with a longer runway before loans are classified as non-performing, arguing that the measure would ease financial stress on small enterprises facing temporary cash flow challenges. The proposal also seeks higher lending limits under the MUDRA scheme, which currently supports micro-enterprises with collateral-free loans.

Alongside these measures, PHDCCI has called for strengthened credit support mechanisms tailored to MSMEs, emphasizing the sector's critical role in employment generation and economic growth. The chamber maintains that enhanced lending frameworks and more favorable classification norms would encourage banks to extend credit to small businesses while reducing the risk of loan defaults pushing enterprises into financial distress.

The recommendations form part of PHDCCI's broader pre-Budget submission to the central government, which typically influences policy considerations ahead of the annual Budget presentation. The push for MSME-friendly credit policies reflects persistent concerns about limited access to formal financing among India's small business segment.