SIDBI, RRBs plan to expand co-lending arrangement to boost MSME credit in rural areas

The pilot initiative has been rolled out in three RRBs, and officials say the early outcomes are promising. | Photo Credit:
SREENIVASA MURTHY V

SIDBI and the Regional Rural Banks (RRBs) plan to broaden their co‑lending partnership to boost credit flow to micro, small and medium enterprises (MSMEs) in rural and semi‑urban regions, with the government emphasizing the importance of using the banks’ extensive network alongside SIDBI’s MSME lending know‑how.

Key Takeaways

• SIDBI and Regional Rural Banks plan to expand co-lending to boost MSME credit flow in rural and semi-urban areas.
• The pilot, rolled out in three RRBs, has shown promising early results, officials say.
• A meeting of all 28 RRB heads, led by DFS Secretary Sanjay Lohiya, discussed combining SIDBI’s MSME expertise with RRBs’ rural reach.
• Rule-engine driven underwriting and MSME cluster data are expected to help RRBs diversify loan books while maintaining asset quality.

The idea was raised at a meeting of the heads of all 28 RRBs, convened by SIDBI in New Delhi and led by Department of Financial Services Secretary Sanjay Lohiya. The goal is to merge SIDBI’s insight into MSME credit needs with the RRBs’ wide reach in small towns and villages.

Officials noted that the model could enable RRBs to diversify their loan books by giving more weight to MSME lending, and that rule‑engine driven underwriting should help maintain asset quality. The gathering also highlighted the use of MSME cluster data to spot and serve more enterprises. The Department of Financial Services encouraged RRBs to treat MSME lending via the co‑lending framework as a key priority for their branches.

The government also pointed out that RRBs could contribute to India’s emerging manufacturing landscape and raise financial awareness among MSMEs, for instance by joining state‑level Rozgar Melas. Central to the expansion is SIDBI’s Co‑Lending Origination Platform, an end‑to‑end digital solution intended to speed up and paper‑less the lending process. Through this platform, applicants can obtain in‑principle approvals quickly after providing the necessary information.

Digital documentation and disbursement further enable funds to be sent straight to borrowers’ bank accounts, eliminating the need for branch visits. The pilot scheme has already been launched in three RRBs, and officials say the early results are promising.

Extending the arrangement to additional RRBs should help meet credit demand, especially for micro and small enterprises in rural and semi‑urban locales. SIDBI Chairman and Managing Director Manoj Mittal called on RRBs to engage actively in the scheme to ensure its success. The meeting also stressed that RRBs must leverage their rural presence more effectively to foster MSME growth, with the expanded co‑lending model offering a broader pathway for firms to obtain formal financing.

Published on August 26, 2026