Synopsis

With digital innovation, deep local insights, and a ‘friends-first’ approach, IDBI Bank is redefining how small businesses in India access credit and scale sustainably. 

India's path to becoming a $5 trillion economy rests on the shoulders of micro, small, and medium enterprises (MSMEs). Accounting for almost 45% of India's exports, creating more than 110 million jobs, and driving grassroots entrepreneurship, MSMEs are not marginal players, but the core of India's economic strategy.

Seeing this, IDBI Bank has emerged as a strategic facilitator of MSME development. With a digital-led lending strategy, decentralised credit support, and firm alignment with government-sponsored schemes such as Mudra and PM Vishwakarma, the bank is transforming the way MSMEs surmount legacy hurdles to capital.

"If India has to be a developed economy by 2047, MSMEs will remain at the centre of this journey," said Sumit Phakka, Deputy Managing Director, IDBI Bank. Phakka participated in the virtual fireside chat, 'Empowering Indian Enterprises: IDBI Bank's Strategic Blueprint for MSME Growth', on the occasion of ET World MSME Day on June 27, 2025.

Conquering the credit challenge through innovation
Affordable, timely access to credit is the biggest stumbling block for MSMEs. Conventional banking requires collateral, healthy balance sheets, or long credit profiles, which are requirements many small enterprises cannot fulfill.

"New-age MSMEs are not always able to provide collaterals or balance sheets that banks demand. That constrains their competitiveness and prevents them from scaling," Phakka clarified.

To fill this gap, IDBI Bank introduced i-MSME Express, a digital underwriting system that uses GST data to evaluate borrower profiles. Whether a new-to-bank or a new-to-credit customer, lending happens fast and in a transparent manner on the basis of real-time, verified data. More than 500 MSMEs have benefited from the i-MSME Express over the last few months, with over Rs 150 crore released in loans of between Rs 10 to Rs 25 lakhs. IDBI is contemplating taking this offering up to Rs 2 crore  soon, covering even small and medium businesses.

Supporting MSMEs in distress with SAJAG
Lending growth is not just about the number of sanctioned loans; it's about viable lending. IDBI Bank realises that even the finest MSMEs may experience temporary adversities. For such instances, the bank has created SAJAG, an asset monitoring system based on predictive analytics and early warning indicators to identify stress in MSME accounts ahead of time. As soon as they are reported, corrective measure plans that range from repayment restructuring to bridge lending or even temporary relief are triggered.

“For smaller accounts under Rs 10 lakhs, decisions are made at the branch level itself. Larger cases go through dedicated MSME rehabilitation committees,” Phakka shared. “Instead of recalling advances, we prefer rehabilitation to help businesses recover.”

Extending beyond lending to strengthening entrepreneurial ecosystems
IDBI Bank's MSME approach extends to supply chain finance, hand-holding entrepreneurs, and creating deep local roots.

Special asset officers in MSME branches assist entrepreneurs in managing their banking and business growth trajectory. The bank is also working closely with state and district-level officials to spot and nurture emerging business clusters.

“Understanding their entire value chain, from buyers to suppliers, helps us offer better collection and payment solutions,” Sumit Phakka added.

Mudra success and low NPA strategy
IDBI Bank has made a mark with exceptional performance in the Mudra scheme, achieving 101% of its target last year with a low non-performing asset (NPA) ratio in single digits, a rare feat in the micro-lending space. This success is fuelled by data-driven credit decision-making, focused outreach to micro current account holders, and fast turnaround lending through digital channels for borrowers with good GST data, but no formal credit history.

Future-ready growth
For the fiscal year ahead, IDBI Bank is targeting a 25% growth in its MSME loan book, building on a 23% increase in the previous year — significantly higher than the industry average. Key strategic goals include:

• Doubling the number of MSME-specific branches to 200 from 100
• Increasing Credit Support Cells (CSCs) to expedite processing and shorten turnaround time
• Scaling digital lending to achieve a Rs 500 crore book in 12-18 
• months
• Improved concentration on clusters of industries to offer customised financial products
• Greater involvement in government schemes for nano and micro entrepreneurs.

From technological innovation to grassroots inclusion, IDBI Bank is not only propelling MSME growth, but driving a national shift, one business at a time. As Phakka concluded on ET World MSME Day:

“We pride ourselves in being a true friend to Indian MSMEs. When businesses know their bank stands by them, in growth and in struggle, they are empowered to aim higher.”