Critical Analysis of Role Played by Financial Institutions in Development of Indian MSME’s

Abstract

Micro, Small and Medium Enterprises (MSME’s) are the major contributor to the economic growth of all countries across the globe. MSME’s contribution to development of national economy of India is significant. In India MSMEs are providing employment opportunities to around 10 million people every year and become the second largest sector generating employment opportunities and providing equitable regional development after agriculture. Indian MSME’s account for more than 90% of total industries in the country, have 45% contribution to industrial production, 40% to national export and 17% in GDP, proved that this sector is backbone of Indian economy. For industrial growth in the nation, uninterrupted and long term source of finance has a critical role to play. Indian Financial Institutions and the Government has a crucial contribution in development and promotion of MSME sector. Whenever we talk about the growth of MSMEs in India, all the time we should appreciate the role of financial institutions who stood behind this sector and supported in the way it was possible. In development of MSME sector, role played by credit lending institutions is remarkable. The paper focuses on the role played by financial institutions in overall development of MSMEs across the nation. Paper also aims to evaluate opportunities and challenges in the sector for raising funds through financial institutions which should be considered by policy makers for better results.