The Madras Chit Funds Act was enacted in 1961 (Madras Act 24 of 1961). It was later renamed the Tamil Nadu Chit Funds Act before being largely superseded by the central Chit Funds Act, 1982. 

Though the act is only a few decades old, the concept of chit is more than a millennium old. The fundamental principles of savings within a closed group of people existed across many parts of the world. There are references to ‘Dhanya Chittu’ in Tamil Nadu and ‘Malabar Kuri’ in Kerala. The word chit is said to be of Tamil origin, சீட்டு, meaning a piece of paper. It refers to the names written on paper and used as a draw of lots.

At its core, a chit addresses two fundamental financial needs at the same time: it encourages savings and provides access to credit. Members contribute a fixed amount periodically, typically a month, to a common pool. Every month, one member receives the pooled amount through an agreed mechanism, such as an auction, bidding process or draw. Other members wait for their turn, or choose to receive their contribution as a lump sum at the end of the cycle.

This is a very simple mechanism, yet it holds deeper significance in terms of equality and inclusion. Everyone contributes to the same pool and, irrespective of their social or financial background, gets an opportunity to access the pooled amount through the same mechanism. 

Filling A Gap

For a large number of small businesses and MSMEs, chits were among the earliest sources of organised external finance. Surprisingly, this remains particularly relevant even today despite the advancements in modern banking. Banks have always operated within a formal framework, and rightly so. A loan proposal typically involves documentation, financial records, assessment of repayment capacity, credit history, and even collateral or guarantees. These processes are necessary for responsible lending, but they can also be challenging for a small entrepreneur who may have a limited financial track record, inadequate documentation or insufficient collateral.

The only other option for such business owners was getting credit through the informal sector - private financiers, moneylenders etc. Thus there is a huge demand for a low-friction model that operates within the formal sector. Here’s where the legislation plays a part. It grants the legal status and recognition to authorised companies to provide their services within the ambit of applicable laws.

Trust Is The Heart Of The Model

There is another element that is difficult to quantify but central to the traditional chit system: trust. Chits historically grew within communities where people knew each other through neighbourhoods, businesses, professional networks and social relationships. Participants were often willing to commit to regular contributions because there was an element of familiarity and social accountability within the group.

The strength of the model depends significantly on the credibility of the organiser and the willingness of members to honour their commitments. This community-based foundation helped chit funds become an important financial mechanism across different sections of Indian society.

Why Chits

The biggest advantage of a chit is its ability to serve as a twin instrument: a savings mechanism and a credit mechanism. However, its real strength goes beyond these two functions and serves different purposes.

1. Savings: For many people, a chit is simply a disciplined way of putting aside a fixed amount regularly and building a financial reserve. The commitment to contribute every month creates a savings habit, and eventual payout gives the subscriber an investable lump sum. In an environment where saving regularly can sometimes be difficult, the discipline built into a chit can be valuable.

2. Planned expenses: Chits can also be used to prepare for expenses that are known in advance, such as education fees, weddings or annual business commitments. I have seen a business owner who has been using chits for many years specifically to fund the annual festival bonus for his employees. He subscribes to a chit, plans his contributions through the year and, when he receives the lump sum, uses it to pay the bonus to all his employees. A large annual expense is therefore managed through a regular savings commitment rather than becoming a last-minute financial burden.

3. Unplanned and unforeseen needs: This is where the flexibility of a chit becomes interesting. A business may suddenly require additional working capital to take advantage of an opportunity or meet a large supplier payment. A family may face an unexpected medical or other emergency. In such situations, having quick access to funds can make a significant difference. Depending on the terms and mechanism of the chit, a subscriber may be able to access the pooled funds when the need arises. Humanity also shines through in such cases. I’ve witnessed situations where the members voluntarily withdrew their claim to accommodate another member’s genuine medical emergency. 

4. For the debt averse: Some people are naturally debt-averse. They are comfortable saving their own money but are uncomfortable taking a loan and carrying a repayment obligation. For such individuals, a chit can provide an alternative way of accessing a lump sum without taking a conventional loan. The subscriber continues to participate in the savings mechanism and, depending on when the amount is received and the terms of the chit, gets access to the funds without creating the same kind of conventional borrowing relationship with a bank or lender.

This psychological aspect is often overlooked. Finance is not only about numbers; it is also about behaviour and one's comfort with financial commitments. This, in my view, is what makes the chit model interesting. The same instrument can support diverse and contrasting needs. 

The Tainted Few 

There is no denying that the chit fund sector has had its share of bad actors. Fraudulent schemes have operated under the broad label of chit funds, some operators have collected money illegally, and failures of certain schemes have caused serious financial losses to subscribers. As a result, the entire industry has often been painted with the same brush. The term "chit fund" itself acquired a negative connotation, even though there is an important distinction between a legally conducted chit and an unregulated or fraudulent money-collection scheme.

This distinction matters. We do not generally describe the entire banking system as inherently bad because banks have experienced frauds, failures and financial scandals. Banking has witnessed some very serious scams, yet we continue to distinguish between the institution itself and the misconduct of particular individuals or organisations. The same principle should apply to chit funds. A poorly run or fraudulent operation should be judged on its own merits and not automatically become a representation of the entire industry.

The Chit Funds Act, 1982 created a statutory framework governing chit fund business, including provisions relating to registration, conduct of chits, rights and obligations of subscribers and foremen, maintenance of records, dispute resolution and penalties. Legally conducted chit businesses therefore operate within a considerably more formal regulatory environment than the stereotypical image of an informal neighbourhood money pool might suggest.

Beyond MSMEs

While the MSME connection is important, the relevance of chit funds extends well beyond business finance. Working people, homemakers, professionals, artists, farmers, literally anyone can participate and subscribe to chits. The underlying need in all these situations is remarkably similar: save regularly and have access to a meaningful lump sum when required. This is perhaps why the chit model has remained relevant despite the enormous transformation in India's financial system. 

Future Ready

India's financial system today is far more sophisticated than it was a few decades ago. Banks have expanded their reach, NBFCs serve a wide range of credit requirements, digital payments have transformed transactions, and fintech platforms have made several financial services faster and more accessible.

Yet the low-friction model of chit funds continues to remain relevant and will continue to impact the financial lives of millions of Indians. Chit companies are also adapting to the demands of the modern market, investing in technology, marketing, branding and human capital development.

The biggest advantage they have on their side is their direct relationship with subscribers and their ability to understand the customer pulse. Because they operate from the ground up and remain closely connected with their customers, they are often able to identify changing needs and micro-trends much faster. This helps them respond with greater agility and offer a level of personal service and human touch that is becoming increasingly rare in a digital world.

RBI Governor Mr. Sanjay Malhotra recently said that someone has to pay for the cost of UPI.The discussion has been going on for quite some years now. There is no doubt that there is a huge IT infrastructure behind the seemingly simple UPI transaction. Not just that, there is also a large security layer that has to remain on the edge constantly. The argument has been that to keep this kind of innovation going, there has to be some sort of fee associated with it. The bone of contention has always been simple: who should bear the cost of UPI?

The Government, keen on making the transition from cash to digital payments, has been absorbing a significant part of these costs and supporting the ecosystem. In this background, the Taxation and Other Laws (Amendment) Bill, 2026 has been introduced. The legislation creates a framework that could allow charges to be levied on certain categories of UPI transactions.

The general market perception is that certain high-value transactions, particularly those above ₹2,000, could be charged. These account for only a small proportion of total UPI transactions. P2P UPI transactions, however, are expected to remain untouched for now.

To put things in perspective, such charges would not be entirely unusual. We already pay for certain banking services such as NEFT, IMPS transfers or Demand Drafts. But I am not entirely convinced.

The Government has actively pushed India towards a digital payments economy. UPI was not merely allowed to grow organically. It was deliberately promoted as a public digital infrastructure that could reduce India's dependence on cash and make payments faster, cheaper and more transparent.

And it has worked.

Today, UPI is deeply embedded in our economy. From a small roadside vendor to a large enterprise, digital payments have become part of everyday commerce. But that also brings us back to the original question.

Cash transactions & Distribution infrastructure

Physical cash also has a significant cost. Currency has to be printed, transported, stored, distributed, collected and eventually replaced. There is an entire physical infrastructure behind the cash that we rarely think about. The cost is ultimately borne by the RBI and in different ways by the institutions that handle cash.

Over time, some of these costs have also found their way to customers. What was once considered a basic banking service has gradually acquired charges for certain forms of handling and logistics.

I know this is an indirect reference because the physical cash equivalent is the e-Rupee. But having said that, the underlying infrastructure in terms of distribution, circulation and collection is partly comparable to the IT infra used for digital transactions. 

Convenience or Forced convenience? 

Digital payments are certainly convenient. And I am willing to pay for convenience. But convenience as a choice is different and forced convenience is different. The push for digital was kind of forced, with indirect restrictions being made on cash movement. I perfectly understand the huge economic benefits that would accrue due to this transition from cash to digital. But there is a larger policy question here. If the Government deliberately encouraged citizens and businesses to move from cash to digital payments, and if that transition serves a larger economic objective, should the cost of maintaining that digital infrastructure eventually be pushed back to the users?

This is not an argument against charging for services. It is an argument about who should bear the cost of a policy-led transition.

UPI has been one of India's greatest digital success stories. It has reduced friction, enabled small businesses to accept digital payments, brought millions of people into the formal financial system and changed the way India transacts. In this context, it is only fair that the Government bears the cost. Yes, it has been doing it so far. Perhaps it would be better that it openly acknowledges it and puts the amendment on the back burner. 

While there is a cost to maintaining this infrastructure and keep innovating, the simple question is, why should it be you and me?

However, there is a misconception that any business can get collateral-free loans. Banks still evaluate the borrower's repayment capacity, business performance and overall creditworthiness before approving the loan. The absence of collateral does not mean the absence of due diligence.

This guide explains everything you need to know about collateral-free business loans and how the CGTMSE scheme works.

What is CGTMSE?

CGTMSE stands for Credit Guarantee Fund Trust for Micro and Small Enterprises. It is a trust established in 2000 by the Government of India and the Small Industries Development Bank of India (SIDBI). The primary purpose of the scheme is to encourage banks, NBFCs and financial institutions, collectively called Member Lending Institutions (MLIs), to lend to eligible MSMEs without insisting on collateral security or third-party guarantees. 

It is important to understand that CGTMSE is not a lending institution. It does not provide loans directly to businesses. Instead, it offers a credit guarantee to the MLI. This guarantee reduces the lender's risk and encourages them to finance deserving businesses that may not possess sufficient assets to offer as security. The scheme has played a significant role in supporting first-generation entrepreneurs, small manufacturers, service providers and businesses seeking formal credit for expansion.

How Does CGTMSE Work?

The process is relatively straightforward. But before going into the process, it is important for borrowers to understand the concept of “Guarantee Fee”. The CGTMSE scheme incorporates an Annual Guarantee Fee (AGF) that borrowers are required to pay for the guarantee provided. Borrowers should understand that the Government undertakes the default risk through the trust, and fees are charged to manage this risk. However, the fees are intentionally kept low to ensure affordability. The fees have undergone many revisions and the latest fees can always be accessed on the CGTMSE website (Click here). As the name suggests, it is an annual fee and has to be paid for the entire loan tenure. MLI’s normally recover these charges separately or factor them into the overall cost of the loan. 

Now let us see the steps that are involved: 

Step 1: The borrower approaches MLI

The borrower submits a loan application along with the required financial and business documents.

Step 2: The MLI evaluates the proposal

Just like any other loan application, the lender assesses the business based on factors such as:

• Nature of business

• Financial performance

• Repayment capacity

• Credit history

• Business experience

• Purpose of the loan

Step 3: Loan approval by the MLI

If the proposal satisfies the lender's credit policy, the loan is sanctioned.

Step 4: MLI applies for guarantee coverage

After sanctioning the loan, the lending institution applies for the CGTMSE guarantee, subject to the scheme guidelines.

Step 5: Issuance of guarantee cover

The application is approved and the guarantee cover is issued to the MLI on receipt of the fee. 

Step 6: Loan disbursement

Once the formalities are completed, the loan amount is released to the borrower.

It is worth noting that the borrower never applies directly to CGTMSE. The interaction is always through the lending institution. Another important point is that the guarantee protects the lender, not the borrower. If a borrower defaults, the bank may invoke the guarantee as per the scheme rules. However, the borrower remains fully responsible for repaying the loan.

Who Can Apply?

Collateral-free business loans under the CGTMSE scheme are intended for eligible Micro and Small Enterprises requiring finance for business purposes.

Depending on the prevailing scheme guidelines and the lender's credit policy, eligible applicants may include:

• Sole Proprietorships

• Partnership Firms

• Limited Liability Partnerships (LLPs)

• Private Limited Companies

• Other eligible business entities

Businesses engaged in manufacturing, services and other eligible activities may qualify under the scheme, subject to applicable guidelines.

These loans can be used for a variety of business purposes, including:

• Working capital requirements

• Purchase of machinery and equipment

• Business expansion

• Technology upgradation

• Capacity enhancement

• Setting up a new enterprise

• Other legitimate business requirements approved by the lender

Loan Limit

The maximum limit currently is ₹10 crore. The guarantee varies from 75% to 90% depending on the applicant category. It is always recommended to check the official website on the latest limits. 

Primary Requirements

Although collateral is not required, borrowers must satisfy the lender's credit assessment criteria. Every bank has its own lending policy, but the following factors are commonly considered.

1. A Genuine Business Requirement

The loan should be required for a legitimate business purpose such as expansion, working capital, equipment purchase or setting up a new unit.

2. Viable Business Model

Banks prefer businesses that demonstrate operational viability and the ability to generate sufficient cash flows for loan repayment.

3. Financial Discipline

Proper maintenance of books of accounts, timely filing of statutory returns and transparent financial reporting significantly improve the chances of loan approval.

4. Credit History

The credit profile of the promoters plays an important role. A healthy repayment track record and a satisfactory credit score strengthen the application.

5. Business Experience

Lenders generally prefer promoters with relevant business or industry experience, particularly for larger loan proposals.

6. Compliance

Businesses should have the necessary registrations and comply with applicable regulatory requirements such as GST registration, Udyam Registration and Income Tax filings wherever applicable.

Remember, while the absence of collateral removes one hurdle, the lender still expects evidence that the business can comfortably service the proposed loan.

Documents Required

The exact documentation may vary depending on the lender and the loan amount. However, most banks generally require the following.

KYC - Identity Proof

• PAN Card

• Aadhaar Card

• Passport

• Driving Licence

• Voter ID

Address Proof

• Aadhaar Card

• Passport

• Driving Licence

• Utility Bills

• Bank Statement

• Rental Agreement (where applicable)

Business Documents

• Udyam Registration Certificate

• GST Registration Certificate (if applicable)

• Shop and Establishment Registration

• Partnership Deed

• LLP Agreement

• Memorandum and Articles of Association (for companies)

• Business licences applicable to the industry

Financial Documents

• Financial statements for the previous two to three years

• Income Tax Returns

• GST Returns

• Bank statements for the last six to twelve months

• Tax audit report, wherever applicable

Loan-Specific Documents

Depending on the purpose of the loan, additional documents may be required, such as:

• Project report

• Machinery quotations

• Vendor estimates

• Working capital projections

• Cash flow statements

Preparing these documents in advance can significantly reduce processing time. Note that each lending institution has their own norms, guidelines when it comes to documentation. This is a broad guideline and not an exhaustive list.

Steps To Follow Before Applying For A Collateral-Free Business Loan 

Every loan application goes through a process and takes some time. Quite often, the delays are because the MLI asks for some document/information and you may not have it readily. If you are prepared, the process can be made faster. These steps will help you: 

Step 1: Assess your funding requirement

Clearly identify why the funds are required and determine the amount needed. Borrowing more than necessary can increase repayment pressure, while borrowing too little may not meet your business objectives.

Step 2: Organise your documents

Ensure that all financial statements, tax returns, registrations and business records are updated before approaching a lender.

Step 3: Choose the right lending institution

The complete list of MLIs is provided on the CGTMSE website (Click here). Before you approach them, do some basic research to identify the institution that best suits your funding requirement. Check their interest rates, processing fees and other charges. Talk to existing loan account holders about their experience and how long it took for their loan to be processed. 

Tips to Improve Your Chances of Approval

Many entrepreneurs focus only on the absence of collateral. In reality, lenders are more concerned about repayment capacity than security.

Here are a few practical ways to improve your chances of approval:

• Maintain proper books of accounts.

• File GST and Income Tax returns on time.

• Keep business and personal finances separate.

• Build a healthy banking track record.

• Avoid cheque returns and loan repayment defaults.

• Maintain a satisfactory credit score.

• Borrow only the amount your business can comfortably service.

• Prepare a realistic business plan supported by financial projections.

• Be transparent about existing loans and liabilities.

A well-prepared application often makes a stronger impression than additional security.

Common Misconceptions About Collateral-Free Loans

Several myths continue to circulate among business owners.

Myth: No collateral means guaranteed loan approval.
Reality: Lending institutions conduct a detailed credit appraisal before approving the loan.

Myth: CGTMSE provides the loan directly.
Reality: The loan is provided by the bank or eligible lending institution.

Myth: Documentation is not required.
Reality: Proper documentation remains essential for loan approval.

Myth: Repayment is not required if the business fails.
Reality: The borrower remains legally responsible for repaying the loan.

Myth: Every MSME automatically qualifies.
Reality: Eligibility depends on the lender's credit policy and the prevailing CGTMSE guidelines.

Conclusion

Collateral-free business loans have significantly improved access to formal finance for India's MSME sector. As per the Government MSME dashboard, until 30 Jun 2026, more than 1 million guarantees worth ₹1,10,838 crores have been given to Tamil Nadu based MSMEs. By reducing the dependence on collateral security, the CGTMSE scheme has enabled thousands of entrepreneurs to obtain funding for starting, expanding and modernising their businesses. 

However, entrepreneurs should remember that fundability is determined by much more than collateral. Sound financial management, proper documentation, timely statutory compliance, healthy banking behaviour and a viable business model continue to play a decisive role in securing finance.

Before applying for any business loan, assess your funding requirement carefully, prepare the necessary documentation and choose a lending institution that best suits your business needs. A well-prepared borrower is always in a stronger position to secure finance and support long-term business growth.

I watched both the FIFA World Cup 2026 semifinal matches live. It couldn't have gotten any better. Two matches, played within 24 hours of each other and yet they felt like they were from two completely different schools of football thinking.

Football has an uncanny way of teaching business lessons. Both games had moments that could have changed the outcome. Both featured talented players, experienced coaches and high-pressure situations. Yet the approaches adopted by the teams were remarkably different, leading to two very different outcomes.

As I watched the matches, I couldn't help drawing parallels with the challenges that MSMEs face every day. Whether it is teamwork, leadership, resilience or strategy, the lessons on the football field often apply just as much in real life.

Semifinal 1: Spain vs France

France's style had been Attack, Attack, Attack and Attack. Four star attackers. Spain on the other hand had a solid defense. A defense that was penetrated just once in the entire tournament. The penalty did give Spain the initial momentum and upper hand but what I felt was that France didn't play as a team. Due credit to Spain, but this match was more of France's undoing themselves rather than the opponent. Individual brilliance doesn't matter if it doesn't serve the team's purpose. France failed to convert because they didn't act like one unit in this match.

If you notice the stats - ball possession, passes were all nearly the same, yet the result was vastly different. That's because one number stood out: 3 saves by Spain. The defense played its part well while the performers didn't.

This is not uncommon in business either. Many MSMEs are built around one or two star performers — a top salesperson, a brilliant founder and a key technical hand. When that individual is on song, everything works. But when pressure mounts and the going gets difficult, if the rest of the team hasn't been built to complement and cover, the whole unit unravels. 

For MSMEs this means:

1. Prodigious talent has to be nurtured but ultimately no one is bigger than the company

2. When the going is tough, all hands have to be on deck

3. Don't simply stick to your role when the team is suffering

Semifinal 2: Argentina vs England

The first 15 to 20 minutes were brutal. I was wondering if they were playing football or rugby. Both teams carried bitterness and it reflected on the field without any apology. Neither ceded any ground.

In the second half, England got a critical breakthrough and scored. Ironically, what they did after scoring this goal led them to their defeat. Yes, they turned ultra-defensive.

This is a mistake I have seen many businesses make. The moment they get ahead with a big  win, close a good quarter, launch a successful product, they shift into protection mode. They stop doing the very things that got them the lead. England had momentum and chose to park it. In business, that is rarely a winning strategy.

The Argentines, desperate to equalize, mounted a series of attacks. The Argentine coach made smart substitutions and kept bringing in fresh energy. This was in direct contrast to England's approach. The equalizer gave more momentum to Argentina and they went on to score the second goal. Only after this did England realize their mistake and started a counter-attack but it was too late by then.

For MSMEs this means:

1. Being defensive in the market against an onslaught will only leave you weaker

2. Learn to create your chances even when there are none

The Leadership Lesson That Stood Out

I am not forgetting Kylian Mbappe's heroics or slighting his efforts, but I personally felt in the second half of the Spain game, he was waiting for chances to be created rather than take control. This was in direct contrast to what Lionel Messi was proactively doing when his team was in trouble against England.

Mbappe waited for the game to come to him. Messi went looking for it. Leadership under pressure is not about position or reputation. It is about who steps up when the team needs it most. On that night, only one of them did.

This distinction matters deeply in business. In most MSMEs I have worked with, the critical differentiator in tough moments is not strategy on paper. It when the leadership steps forward, takes ownership and drives the response. Titles don't lead. People do.

What It All Comes Down To

Winning or losing is decided by the approach you choose. What worked previously may not work now. What is important is the ability to iterate on the spot and take quick decisions on the fly.

For both France and England, it could have been a one-off game but it was the one that sent them off. The same is true in business. A single decision may not define your journey, but the approach you adopt in critical moments often does.

The best businesses, like the best teams, are not necessarily the most talented. They are the most adaptable.

A white paper on the financial status of Tamil Nadu was released yesterday. I haven't had the opportunity to read the entire report yet. I have only seen some of the key highlights. The broad takeaway appears to be rapidly rising debt levels alongside concerns about revenue growth, particularly the State's own tax revenue.

This post is not about fiscal management or the politics behind it. 

Instead, it got me thinking about a situation that many MSMEs face as well: debt burden. Whether it is a state government or a small business, debt by itself is not necessarily a problem. The real question is whether the borrower has the ability to service and eventually reduce that debt. One of the biggest mistakes businesses make is pretending a debt problem does not exist. Debt rarely becomes unmanageable overnight. It builds slowly, month after month, while owners convince themselves that things will somehow improve on their own.

Why debt becomes a burden?

Before discussing solutions, it is important to understand why debt becomes a burden in the first place. In my experience, debt itself is rarely the problem. The real problem is cash flow. A business may be profitable on paper and still struggle to meet its debt obligations because cash is locked up in inventory, receivables or slow-moving assets. The EMI does not wait for your customer to pay. The interest meter does not pause because a large order got delayed. Debt becomes stressful when the timing of cash inflows and cash outflows stops matching.

This is where many entrepreneurs get caught off guard. They look at their annual profits and assume everything is under control. But lenders are paid from cash flow, not from accounting profits. A business can survive a bad month. It can even survive a bad quarter. What it struggles to survive is a prolonged mismatch between obligations and cash generation.

There are several ways to address this challenge. Better working capital management can release cash trapped inside the business. Factoring can accelerate collections from customers. Leasing can reduce the need for debt-funded asset purchases. Debt restructuring can provide temporary breathing room when repayment schedules become difficult. These are all useful tools and each deserves a deeper discussion in its own right, something I will cover in a separate article.

When you look at debt reduction from a broader perspective, the most successful turnarounds are driven by a combination of a few fundamental levers.

1. Increase Revenues

This is the most sustainable solution. A growing top line creates the cash flows needed to service debt comfortably. When revenues are rising, debt becomes easier to carry. The business generates more cash, the EMIs feel smaller relative to income, and the headroom to invest further opens up.

This is why I always tell clients: the best answer to a debt problem is often a revenue problem in disguise. Fix the revenue, and the debt starts to feel manageable. Leave the revenue stagnant, and even a modest loan can begin to feel suffocating.

2. Reduce Expenses

Sometimes this requires difficult decisions. Cost rationalisation is rarely pleasant. Letting go of people, renegotiating with suppliers, dropping underperforming product lines, cutting overheads and so on. None of this is easy but necessary. A penny saved is a penny earned and it adds directly to your bottom line. 

But done with clarity, it can improve cash generation significantly. A leaner cost structure means more of every rupee earned goes toward debt repayment. The goal is not to cut blindly. It is to cut what is not contributing to growth, and protect what is.

3. Replace High-Cost Debt with Lower-Cost Debt

Refinancing can reduce interest burden and improve cash flows, even if the principal outstanding remains the same. Many MSMEs carry debt at 18 to 24 per cent per annum from informal or semi-formal sources, simply because they do not know how to access better-priced capital.

Moving from a moneylender to a bank, or from a bank to a government-backed scheme, can meaningfully change the cash flow picture. Sometimes the smartest move is not to earn more or spend less. It is to borrow smarter.

The Real Challenge

Many entrepreneurs focus on raising capital. Very few focus on creating the revenue and cash flow needed to comfortably run the business. 

I see this pattern repeatedly. A business raises a term loan or secures a credit line. There is a burst of activity. Then the revenues do not grow as expected, the costs do not come down, and the debt starts to feel heavy. Not because the loan was wrong. But because the business did not do the work to grow into it. The lesson is simple. Debt is neither good nor bad. When revenues are growing and costs are managed, debt is a lever. When revenues stagnate and costs remain unchecked, the same debt becomes a burden. The instrument has not changed. The context has.

Perhaps the real challenge is not how much debt you have. It is whether your business is growing fast enough to stay ahead of it. That is the question every MSME owner needs to answer every day. Every day matters here because sales cycles and working capital cycles can shift quickly, and the interest clock does not stop. Debt does not disappear because we stop talking about it. It does not become smaller because we choose optimistic assumptions. 

The first step towards reducing any debt burden is simple:  Acknowledge it honestly, don't whitewash it.

The ongoing crisis in West Asia is no longer a distant geopolitical issue discussed only on news channels. Its impact is slowly reaching factories, warehouses, transport operators and small businesses across India. For many MSMEs, the effects are already visible. Input costs are rising. Freight charges are fluctuating. Delivery timelines have become uncertain. In some sectors, sudden price spikes are increasing pressure on already thin margins.

While large companies may have the balance sheet strength to absorb temporary shocks, MSMEs often operate with limited financial buffers. Even a small increase in raw material costs or a delay in receivables can disrupt working capital cycles significantly. In this backdrop, the Government of India’s emergency credit support initiative comes at an important time. The move is expected to provide immediate liquidity relief to eligible borrowers and help businesses manage short-term disruptions.

The Real Problem Is Liquidity.

Many entrepreneurs assume business stress begins when profits decline. In reality, the first warning sign is usually cash flow pressure. A business may still be profitable on paper and yet struggle operationally because cash gets locked in inventory, receivables or rising input costs.

Consider what is happening currently across sectors:

• Imported raw materials have become costlier

• Logistics costs are fluctuating

• Commodity-linked industries are witnessing volatility

• Suppliers are tightening credit periods

• Customers are delaying payments to conserve cash

The result is simple. Businesses need more working capital to run the same operations. For MSMEs already operating with stretched limits, this creates immediate liquidity stress. 

Working capital is often misunderstood as just a finance term. In reality, it is the fuel that keeps a business moving every single day. During stable periods, businesses can plan cash flows with reasonable accuracy. But during external shocks, uncertainty increases across the supply chain. For example, a shipment delay may increase inventory holding costs, a sudden rise in fuel prices may impact transportation margins and customers facing stress may delay payments by another 30 days. Individually, these may appear manageable. Collectively, they can create a serious strain on MSMEs. This is exactly where timely credit support becomes important.

A Welcome Move by the Government

The emergency credit support scheme announced by the Government of India aims to address this short-term liquidity challenge. Many MSMEs have already started receiving communication from their banks regarding additional credit eligibility under the scheme. Reports indicate that eligible borrowers may avail additional working capital support of up to 20% of their peak working capital limits, subject to applicable norms and conditions.

The broader intent behind the move is important.

The government is acknowledging that external geopolitical developments can create temporary stress for businesses that are otherwise operationally healthy. Instead of waiting for stress to become a crisis, liquidity support can help businesses navigate the disruption early.

This is particularly relevant for MSMEs because they contribute significantly to employment, manufacturing output and economic activity in India.

Around 1.1 Crore MSMEs Could Benefit

One of the most notable aspects of the announcement is the potential scale of impact. Estimates suggest that around 1.1 crore MSME accounts could benefit from the additional credit support framework. That is significant.

For many businesses, access to timely liquidity during uncertain periods can make the difference between continuity and disruption.

More importantly, emergency support helps entrepreneurs avoid reactive decisions such as:

• Delaying salaries

• Cutting productive capacity

• Reducing inventory sharply

• Borrowing at very high informal interest rates

• Missing supplier commitments

When liquidity support reaches businesses quickly, it improves confidence across the ecosystem.

MSMEs Must Use This Opportunity Carefully

While additional credit support is helpful, businesses must also use this phase to strengthen financial discipline. Emergency liquidity should not become an excuse for weak cash flow management. Instead, MSMEs should use this period to review:

• Inventory cycles

• Customer credit policies

• Vendor negotiations

• Pricing structures

• Cash flow forecasting

• Working capital utilization

Many businesses track profitability monthly but do not monitor cash conversion cycles closely. During uncertain times, that becomes risky. Entrepreneurs must remember one important point. Growth problems and liquidity problems often look similar in the beginning. Both create cash pressure. But the solutions are very different.

A Reminder for Entrepreneurs

External crises are beyond the control of MSMEs. Geopolitical tensions, commodity volatility and global supply chain disruptions can emerge suddenly. But preparedness, financial discipline and timely access to liquidity can reduce the impact significantly.

This is why working capital management is not merely an accounting exercise. It is a survival capability for businesses. The current emergency credit support initiative is therefore more than just another banking announcement. It is a recognition that MSMEs need support during periods of uncertainty, especially when disruptions originate outside the domestic economy.

For entrepreneurs, this is also a reminder to build stronger financial systems, improve visibility on cash flows and remain prepared for volatility. Because in business, resilience is not built during stable times. It is tested during uncertain ones.

Link to press release:  https://www.pib.gov.in/PressReleasePage.aspx?PRID=2258114&reg=3&lang=1

I was glad to reconnect with Mr. Raghunathan Ramarao a few weeks ago at a Rotary meeting. Our previous interactions had been nearly a decade back, so it was good to sit down with him over dinner and have a discussion. In our conversation, what struck me the most was his genuineness and the sincerity to make a difference in the lives of the less privileged. 

Just like any normal person, he could have led a comfortable life. Having worked with top MNCs and large corporations, it would have been easy to continue on that path. Instead, he chose a different route. In 2012, he started Kalpavriksha Seva Trust and since then has transformed 750+ lives through free education, skill development and community empowerment.

What stood out even more was that it is not just him. His entire family is involved in service, making it a shared commitment rather than an individual effort.

Here are three takeaways that stayed with me from this interaction. 

1. Being Prepared

Within an hour of our interaction, he sent across all details about the trust, the work they are doing and relevant video links. This clearly showed that everything was already in place. The documents were ready. The narrative was clear. There was no hesitation in sharing.

This was a big lesson for me.

Quite often, we don’t know whom we are going to meet and when. But it always helps to be prepared with our credentials, stories and proof of work. At the same time, this did not feel like a random forward. I am assuming it was shared after his own quick assessment. It was not a spray and pray approach, but a well thought out and intentional follow-up. On a personal note, I made a mental note to adopt this method. The intention was always there on my part but what lacked was consistent execution and speed of response.

2. Compassion

In a larger social context, many of us are inclined towards charity, philanthropy, or even social service. Many stop at sympathy or empathy. Compassion goes further. But only a few take that one extra step. It is the point where feeling becomes a willingness to act, consistently and without expectation. It is not a question of resources but one of heart and mindset. This compassion is what truly stood out during the interaction. Moving from a successful corporate career to dedicating time and effort towards social impact is not an easy shift. It requires a deep sense of purpose.

What struck me even more was the clarity with which he spoke about the trust and its beneficiaries. There was quiet conviction and genuine concern for creating long-term impact. The work done through the trust reflects a sincere commitment towards people and communities. It is not transactional or event-driven. It is a sustained effort over years. Compassion, in this context, is not just a feeling. It is a consistent action.

One more aspect that stood out was how deeply service has become part of the family’s value system. It is not restricted to one individual taking initiative. The involvement of the entire family sends a strong message about shared purpose and collective responsibility. When service becomes a shared value within a family, the impact naturally becomes larger and more sustainable. It moves beyond isolated acts of goodness and evolves into a culture.

The impact created through the trust is therefore not limited to direct beneficiaries alone. When one life is transformed through education or skill development, it creates a ripple effect across families and communities.

In many ways, this is also how meaningful legacies are built. Not through words, but through values practiced consistently over time.

Closing Reflection

Leadership is not always about scale or visibility. Sometimes, it is about quiet consistency, preparedness and the intent to make a difference.

My interaction with Mr. Raghunathan Ramarao reinforced a simple thought. When professionalism meets compassion and when intent is backed by action, the impact can be both meaningful and lasting.

The Tamil Nadu state election results were announced yesterday. It created an earthquake of sorts and ushered in a new political era. Vijay, among the top film stars, decided to leave his career at its peak and serve the people through electoral politics. He started Tamilaga Vettri Kazhagam (TVK) as an alternative to Dravidian (DMK & AIADMK) and National Parties (BJP & INC)

I keenly follow politics both at the state and national level. Though I thought it was a welcome move I had doubts about his ability to convert votes into seats. This is because winning is just about a simple majority. The first across the post. Tamil Nadu politics is deeply rooted in caste and community equations. Added to this are the regional powerhouses within each party plus the money (cash for votes) deployed in the final stages of the election. To be honest, I thought TVK will lose its deposit in many constituencies. Well, the people's mandate has proved everyone wrong. And I stand corrected and humbled. 

As I look back, this is a classic David vs. Goliath battle we all grew up listening to. In the modern political context, this is happening quite regularly. In fact, our neighbouring countries like Sri Lanka, Nepal have given positive verdicts to the challengers. This isn’t just a political upset. It’s a masterclass in strategy, positioning and execution.

In the business world we have seen this quite often. A startup or new innovation challenging an established company and taking them down - Apple vs. Blackberry, Netflix vs. Blockbuster, Marico vs. Unilever and so on. Seen through a business lens, this mandate offers some clear and practical lessons. Here are a few that MSMEs and startups can take away.

1. What problem are you solving?

This is the single most important factor. But given the population size, how does one go about identifying it? I think Vijay's team tackled this by identifying the competitor first and then working backwards to see the problem people had with them. He positioned the party as the answer to it.

Within that, there are multiple issues - corruption, nepotism, bureaucratic red tape, poor quality of government services, etc. Since there were many, they simply packaged it into one bundle and labelled it as evil. It was a strong analogy and very relatable for the customers. Many slogans were built around this.

2. What's your Ideal Customer Profile (ICP)?

It was very clear from the start because it was the fan base which got converted into the party. But the fan base alone won't suffice to win elections. They wanted to target multiple segments and this is where I think they created the concept of ideological leaders. To the uninitiated, there are 5 leaders from whom the party derives its ideology. Each leader represents a different strand of thought and identity. This way, even competing segments felt, “Ok, I’m included in this.”

So, in your business, who are you targeting?

3. Know your competitor

From the very start, the competitor was called out. Vijay didn't fight the battle on many fronts and lose energy. He concentrated all efforts on one competitor. In business, you can adopt this as long as there is an underlying distrust or discomfort among users. In this case, people were looking for an alternative and this was provided.

From our own backyard, I recollect stories of Zendesk & Freshdesk (now Freshworks). Freshworks simply called out the flaws of the competitor. They were able to do it only because they had a thorough understanding of the competitor’s product and features.

4. Consistent messaging

The focus was only on one competitor, with no deviations. The seeds were sown consistently in the minds of people. As the message kept spreading, even the fencesitters started noticing. Vijay was very strident in targeting one competitor on all platforms. He refused to acknowledge a tripolar contest and made it a bipolar contest. This way, the message he sent was very clear and simple - I’m the alternative.

So, what is the message you are leaving in your target market?

5. Branding

This is a case of personal branding coming to the fore. But equally important is the visual element of “Whistle”. I don’t know who chose that symbol, but the moment it was released, I felt this could be a gamechanger. Old timers know, people in rural, semi-urban and even in a few urban pockets blindly vote for the symbol. Think of Rising Sun, Two Leaves, or Mango. It is deeply embedded in people’s psyche. This is one reason why Naam Tamilar Katchi fought to get back the Farmer symbol.

It is not easy to popularise a symbol with a limited budget. That is why many parties look for a strong visual. Whistle is low cost, widely used, and hence creates an immediate connect. MSMEs and startups, think about your own logo. Is it connecting back to your core identity and values? Is it easy to make it popular?

6. Converting loyalists into evangelists

A loyalist stays true to you, but an evangelist does the work for you. Much like Apple fans or Harley owners, the evangelist carried the message. This is despite Vijay campaigning in very few places. In one statement, he said, “I may not be able to visit everywhere, but I will ensure Whistle enters every home.” This is where the loyalists got converted into evangelists and started carrying his message to every nook and corner.

They even forced people to vote as per their choice. This may not be right, because voting is a personal choice and a fundamental right. But the larger lesson here is about the raving fans who made it possible. In marketing, we have heard about decision-makers, influencers, etc. This is a classic example of influencers forcing decision-makers.

So, how are you going to get your customers to become evangelists?

Conclusion

In conclusion, this is a classic case study for all entrepreneurs and business owners. David didn't defeat Goliath by being stronger. He won by being smarter, focused and deeply connected to his cause. That is exactly what this election demonstrated and this is what every MSME and startup must internalise. Clarity beats resources. Consistency beats noise. And raving fans beat paid armies, every single time.

Kudos to the brilliant political strategists and the entire team behind the scenes who made this remarkable victory possible. 

FY2025-26 was demanding. Full of meetings, revised plans, deadlines and moments that tested patience in ways I hadn't quite anticipated. And yet, as I sit down to reflect on this year, the sharpest lesson didn't come from any of that. It came from a roadside shop.

I had gone to the e-sevai center to get a government certificate. It was crowded, so I decided to return the next day. On the way back home, I spotted this shop's signboard, Hello Xerox at Little Mount, Chennai. It was one of those ubiquitous shops dotting the roadside. Unremarkable on the outside. But this one offered a lot of added services. The person behind the counter was helpful and within five minutes, the work was done. The service charge was nominal. He told me I'd receive a notification from the Government once the certificate was ready and shared a link to check the status. Simple, neat and job done.

Well, the story is not about what happened till now. Nor is it about how Xerox became the default name for photocopying services. 

It begins a few days later. I had already checked the government link and downloaded the certificate myself. And then, a few minutes later, a WhatsApp message arrived from the shop with the certificate attached. He had been tracking it too. Quietly, without being asked. The job was done. Payment had been completed. There was absolutely no obligation for him to download that certificate and send it to me. It wasn't part of any brief. No one asked him to. But he did it anyway. And that one small gesture is what made all the difference. Now, he has a loyal customer. I go back to that shop for my documentation needs, without a second thought.

The lesson from that little shop: a small extra effort, offered consistently, compounds into something far greater over time.

Post-Sale Service: Where Most Businesses Drop the Ball

Here's the uncomfortable truth, most businesses, regardless of size, invest heavily in acquiring customers and almost nothing in retaining them. The sale is celebrated. What comes after is largely neglected. For MSMEs, this is a costly blind spot. These are the mistakes that play out repeatedly:

• The sale ends and so does the relationship: Once payment is received, attention moves to the next prospect. The existing customer is left to figure things out on their own. This is where trust erodes quietly, without a single complaint being raised because most dissatisfied customers simply don't come back.

• Process over people: Automated messages, standard responses, templated follow-ups none of these can replace the feeling of being genuinely looked after. Customers can tell the difference between a system responding to them and a person caring about them. MSMEs that rely entirely on automation for post-sale communication are solving the wrong problem.

• No confirmation, no closure: A transaction that ends without acknowledgment leaves the customer in uncertainty. Did it go through? Is everything in order? A simple confirmation as a message, a call, even a WhatsApp note costs next to nothing but signals professionalism

• Treating service as a cost, not an investment: When post-sale support is viewed purely as an operational expense, it gets understaffed and under-trained. The mindset shift that every MSME owner needs to make is that, “your most profitable customer is the one you already have”. Retention is cheaper than acquisition, every single time.

The MSME Advantage 

Large corporations have the budgets, the tools, and the playbooks. But they also have multiple layers of approvals, processes, and departments that slow down the very human instinct to simply help. MSMEs don't have that problem. You have proximity. You have agility. And you have the freedom to act on good intent without waiting for a policy to permit it.

The person at Hello Xerox didn't need a CRM system or a customer success framework. He needed thirty seconds and the right mindset. That is the entire playbook. So MSMEs simply Xerox this idea in your business. 

As an MSME owner, your edge isn't price or scale. It is the ability to make every customer feel like they matter because in a business your size, they genuinely do. Every business is unique, no doubt. But if you think it through, there are usually dozens of ways to genuinely delight a customer at zero cost to the company. It doesn't need a budget. It doesn't need a committee. It needs the right intent, and the willingness to go just one step further than expected.

That WhatsApp message took him thirty seconds. It earned him a customer for life.

As I close the books on FY2025-26, that's the thought I'm carrying into the new year, not a number, not a target. Just the quiet reminder that intent, expressed in small actions, is what builds something lasting.

Here's to FY2026. May we all find our thirty-second moments.

I first met Datuk Seri M. Saravanan around 2018. At that point, it was purely an introduction with no particular depth to it. I used to accompany my Rotary friends when they went to meet him and I was more of an observer than a participant in those early interactions.

Probably one of the first things I noticed was quite simple. He is a foodie. He genuinely enjoys exploring different cuisines. Being a foodie myself, I could immediately relate to that. In fact, many of the initial interactions happened over meals accompanying our Rotary friends to different restaurants whenever Datuk was in Chennai. Food, as it often does, created an easy and natural common ground.

But over time, that changed. The acquaintance slowly evolved into a relationship. The meetings became more frequent, the conversations more open, and what started as a formal interaction began to reveal the layers of the person behind the public image. I began to observe qualities that define leadership in a much deeper and quieter way.

He has also been a strong supporter of our Seyal forum and has been its patron for several years now. We had the opportunity to recognize him with an award through Rotary. Over the years, I have met him on multiple occasions, in different settings, across cities and even countries including the inauguration of the Singapore Chapter in November 2025, where he was the Chief Guest.

Three qualities about him that stand out for me.

1. A True People's Leader

He is almost always surrounded by people. But what is interesting is not the crowd. It is how he engages with them. There is no visible hierarchy in his interactions. He speaks to everyone. He listens. He acknowledges. There is a certain warmth in the way he connects with people that does not feel forced or political. It feels genuine and that distinction is not a small one.

One instance that stands out is from the COVID period. Many Malaysian Tamilians were stranded in Chennai due to the lockdown. It was a deeply uncertain time, travel was restricted overnight. With flights being cancelled, anxiety was high and people were far from home with no clear answers. During that phase, he took significant personal efforts to ensure their safety and well-being. There are many such instances I could point to, but what matters more than the actions themselves is the intent behind them.

Leadership, in such moments, is not about position or visibility. It is about responsibility and the willingness to show up for people even when no one is watching.

2. He Values Friendship

In many public roles, relationships tend to become transactional over time. Meetings are scheduled. Conversations are measured. Interactions are often driven by necessity rather than genuine connection. But with him, there is a visible and consistent effort to maintain friendships beyond the formal context. He remembers people. He stays connected. He makes time and that, in itself, says a great deal about him.

I have had the opportunity to meet him along with a small group at his home. In that setting, away from public events and formal gatherings, he was a perfect host - warm and  attentive. That ability to transition from a public leader to a personal friend, without effort or pretence, is a quality that is rare.

3. Energy That Sustains

Energy is an underrated leadership trait. Not the performative kind that appears on stage and disappears backstage, but the kind that remains consistent regardless of the setting or the hour. There is no visible fatigue in how he interacts with people. No drop in enthusiasm. No sense of disengagement. Perhaps the positive people around him play a role in sustaining that energy. 

I have seen him at the airport well past midnight, after long and demanding travel schedules, engaging with the same ease as he would at any formal event. He also maintains his physical fitness with evident discipline. I am not entirely sure how he finds the time for it, but it reflects something important. Discipline, more often than not, sits quietly behind sustained energy and sustained energy is what keeps a leader going long after the initial enthusiasm has faded.

Over the years, what started as a casual introduction over shared meals turned into a series of meaningful observations across very different settings. Not every leadership lesson comes from a structured conversation or a formal exchange. Sometimes, it comes from simply watching how a person shows up - consistently, unhurriedly, and with the same warmth across situations, across years, and across the distance that time can often create.