financing products to obviate the problem of delayed payments of msme. the mechanism may prove complementary to the treds platform and would further alleviate the problem of delayed payments. v. way forward 20. as the msme sector holds immense potential, the need is to have a right set of policies and enabling framework which guide and support msmes to effectively handle their existing problems and venture into new areas. while both the government and the rbi have introduced a plethora of measures for improving access to finance and to promote growth of the sector, the small size of individual units and informal nature of the sector continue to pose challenges. 21. the traditional bank lending system by banks is based on financial statements and collateral of the borrower. with increased availability of data from several sources, including gstn, income tax, credit bureaus, etc., it is now possible to appraise the msme loan proposals expeditiously by doing due diligence online. further, with the help of account aggregators ( aa ), lenders will have access to potential borrower ’ s financial information at a single point, of course, with his / her consent. furthermore, emergence of fintech companies has made it possible to assess credit worthiness of msmes by utilising unexplored data sources such as digital transaction trails, data generated through e - commerce sites, etc. some lenders are collaborating with fintech companies to take advantage of such surrogate data for speedier credit underwriting for extending loans to msme sector. these new architectures would expand the reach of credit. 22. while the new models are beneficial for those units which are digitally active, a large segment of msme units access credit through traditional lending models. while micro enterprises act as a starting stage of entrepreneurship that requires low investment in technology, units graduating to small and medium enterprises have to enhance their technical capacity and explore newer markets in order to stay competitive for sustainable growth. recent policy efforts will provide an enabling environment and facilitate the msme sector seize the new emerging opportunities. i must add that as a regulator, we in rbi have to safeguard financial stability while ensuring wider access to finance. banks and other players on their part have to ensure prudent lending. 23. besides, we in rbi have started launching cohorts under the regulatory sandbox. first such cohort was launched in november 2019 with the theme of ‘ retail payments ’ to spur innovation in digital payments space to design and

trinity. and the third facet is the framework for the adjustment process. let me turn to these one by one. role of exchange rates first, on the role of exchange rates – a prime lever for redressal of external imbalances. global rebalancing will require deficit economies to save more and consume less. they need to depend for growth more on external demand which calls for a real depreciation of their currencies. the surplus economies will need to mirror these efforts – save less and spend more, and shift from external to domestic demand. they need to let their currencies appreciate. the question boils down to what can surplus countries do domestically to increase consumption and what can deficit countries do domestically to increase savings. the problem we have is that while the adjustment by deficit and surplus economies has to be symmetric, the incentives they face are asymmetric. managing currency tensions will require a shared understanding on keeping exchange rates aligned to economic fundamentals, and an agreement that currency interventions should be resorted to not as an instrument of trade policy but only to manage disruptions to macroeconomic stability. capital flows that takes me to the second facet of global imbalances – return of lumpy and volatile capital flows. since capital flows have become such an emotive topic around the world in recent months, it is important perhaps to recall a few realities. first, that emes do need capital flows to augment their investible resources, but such flows should meet two criteria : they should be stable and be roughly equal to the economy ’ s absorptive capacity. the second reality that we must remember is that capital flows are triggered by both pull and push factors. the pull factors are the promising growth prospects of emes, their declining trend rates of inflation, capital account liberalization and improved governance. the push factors are the easy monetary policies of advanced economies which create the capital that flows into the emes. what this says is that international capital flows comprise a structural component and a cyclical component. it is the cyclical component that typically disrupts the macroeconomic stability of emes. bis central bankers ’ speeches that said, the multi - speed recovery around the world and the consequent differential exit from accommodative monetary policy have triggered speculative capital flows into emes. the most high profile problem thrown up by capital flows, in excess of a country ’ s absorptive capacity, is currency appreciation which erodes export competitiveness. intervention