The structural credit gap of approximately ₹30 lakh crore, driven by persistent collateral requirements and limited credit history, is the primary cause of struggles for Indian MSMEs by restricting affordable access to finance for millions of micro-enterprises and service-sector businesses.

CURRENT STATE

This credit gap creates severe working capital constraints and confidence issues, with ₹8.1 lakh crore locked in outstanding receivables, exacerbating liquidity problems. Despite government schemes like CGTMSE and the ₹10,000 crore SME Growth Fund, many MSMEs remain excluded from formal credit due to borrowing costs of 8-18% and collateral demands.

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