The Federation of Indian MSMEs has raised concerns about an RBI proposal to prevent NBFCs from providing revolving credit, which allows borrowers to repay and draw funds again. The regulator aims to tackle opaque lending and evergreening, where fresh lending conceals unpaid debt.

FISME argues that shifting all such borrowing to term loans could increase documentation, processing costs and approval delays. Digital working-capital facilities, dealer funding, supply-chain lending and invoice-linked finance could be affected. Its secretary general, Anil Bhardwaj, distinguished business finance from consumer borrowing and warned that reduced flexibility could push smaller firms towards more expensive informal lenders.

The industry body has proposed retaining revolving facilities with defined limits, yearly reviews and stronger disclosure of borrowers’ debt. It also wants firm restrictions on automatically rolling over troubled loans. Separately, it has sought protection for trade-linked products, including factoring and invoice discounting through platforms such as TReDS, which help businesses access cash while customer payments are pending.

For any final framework, FISME has requested that existing facilities continue on their current terms and that lenders and borrowers receive six to twelve months to adjust. It wants mandatory loan conversions to carry no additional processing or foreclosure charges. For digital-lending concerns, it favours using the Digital Personal Data Protection framework rather than cutting off funding.