A ₹60 Lakh Crore Gap, and a Plan to Close It by Connecting the Dots

India's MSME sector has no shortage of digital tools. Businesses use accounting software to track invoices, banks to manage cash, GST systems for compliance, and digital platforms to manage orders and payments.

The problem is that these systems often don't talk to each other.

For an MSME owner, this may seem like a technical inconvenience. For a lender, however, it can make the difference between approving a working capital loan and asking for collateral.

A new report by Bain & Company and NPCI Bharat BillPay highlights the scale of the problem. According to the report, India's smaller businesses face a credit shortfall of more than ₹60 lakh crore, with more than 70% of that gap coming from short-term working capital requirements.

The report's proposed solution is straightforward in principle: connect the dots.

India's MSME Credit Problem Is Also a Data Problem

Many MSMEs already generate significant amounts of digital financial information.

Their business activity can be spread across:

• Accounting and ERP systems

• Bank accounts

• GST filings

• Digital payment platforms

• Buyer and supplier portals

• Invoices and purchase orders

The challenge is that this information is fragmented.

A lender trying to assess the financial health of a small business may have to collect and verify information from several different sources. This makes underwriting slower and more expensive.

As a result, lenders may fall back on traditional indicators such as collateral, even when the business has sufficient revenue and cash flow to repay the loan.

The Proposed "India B2B Operating System"

The Bain and NPCI Bharat BillPay report proposes an interoperable "India B2B Operating System" to address this fragmentation.

The idea is to create common digital infrastructure connecting:

• Businesses

• Banks

• Financiers

• Commerce platforms

• Payment systems

• Business information systems

Using standardised APIs, the proposed system could create a common, machine-readable record of invoices, payments and other trade-related information.

Instead of asking a lender to piece together a business's financial story from scattered documents, verified transaction data could be made available in a standardised format—with the MSME's consent.

That could make credit assessment faster and potentially reduce the dependence on collateral.

Buyer-Confirmed Invoices Could Unlock Working Capital

One of the most interesting mechanisms highlighted in the report involves buyer-confirmed invoices.

Imagine an MSME supplies goods to a large company. The goods have been delivered, and the buyer digitally confirms that it owes the supplier ₹10 lakh.

For the MSME, the problem is that the payment may arrive weeks or months later.

For a lender, however, a digitally verified invoice backed by a credible buyer can provide much stronger evidence of an expected cash flow.

The lender could potentially advance money against that receivable rather than lending without visibility into the underlying transaction.

According to Bain and NBBL, this mechanism alone could potentially convert around ₹8 lakh crore of delayed MSME receivables into financeable working capital, reaching roughly 8 crore MSMEs.

The importance is significant given that MSMEs collectively contribute close to 30% of India's GDP.

Formal Lending Still Covers Only Part of Demand

The report estimates that formal lending channels currently meet only around 30–40% of debt demand among smaller enterprises.

That leaves a substantial portion of legitimate business financing requirements either unmet or dependent on informal sources of credit.

For businesses, this can mean:

• Higher borrowing costs

• Limited working capital

• Delayed expansion

• Difficulty accepting larger orders

• Greater dependence on informal financing

Improving the flow of verified business data could therefore have an impact beyond simply making loan applications faster.

The Next Step: Cash-Flow Intelligence and AI

The report also points toward a more advanced lending ecosystem.

Once business data becomes more connected and standardised, lenders could use advanced analytics and generative AI to develop what the report describes as "cash-flow intelligence."

This could enable:

• Dynamic risk scoring

• Real-time assessment of business performance

• Faster credit decisions

• Automated underwriting

• Credit limits that adjust as cash flows change

Over time, the report envisions agentic credit underwriting, where lending decisions require considerably less manual intervention than they do today.

The Biggest Challenge Is Coordination

Building this infrastructure isn't simply a technology project.

It would require coordination between governments, banks, fintech companies, large buyers and millions of MSMEs.

The report identifies several requirements, including:

• Government recognition and regulatory support

• Easy technology integration for smaller businesses and lenders

• Participation from large "anchor" buyers

• Clear data-sharing rules

• Defined liability when things go wrong

• Strong data protection and governance

There is also the classic cold-start problem.

A network becomes valuable only after enough participants join, but businesses and lenders are reluctant to join a network that does not yet have enough participants.

The report therefore suggests that a neutral, open and regulated national entity may be needed to coordinate the ecosystem.

Could MSME Credit Get Its "UPI Moment"?

There is a broader comparison behind the proposal.

India's formal business sector contributes around 45% of real Gross Value Added, compared with more than 70% in several major global economies.

The report links part of this gap to fragmented business infrastructure.

UPI demonstrated what can happen when India creates a common, interoperable digital rail for a function used by millions of people and businesses.

The question now is whether the same approach can be applied to MSME credit.

If payments, invoices, compliance data and business transactions can become connected and consent-based, lenders may be able to assess businesses based more on actual economic activity and cash flow and less on the assets they can pledge.

For India's MSMEs, closing a ₹60 lakh crore credit gap may therefore depend not only on finding more money—but on building the digital infrastructure that allows lenders to see where that money can be lent safely.