MSMEs are regarded by creditors as high-risk borrowers because of insufficient assets and low capitalization, vulnerability to market fluctuations and high mortality rates. Information asymmetry arising from SMEs’ lack of accounting records, inadequate financial statements or business plans also makes it difficult for creditors to assess the creditworthiness of potential SME proposals.
The steady pace of reforms has borne fruit, including larger sections of society within the reform process. What is remarkable is the sheer magnitude and quality of the reform effort as evident in actual outcomes. The banking system in India has undergone significant changes during the last 16 years.