Chief Economic Advisor V Anantha Nageswaran has called for a review of non-performing asset classification norms for micro, small and medium enterprises (MSMEs), saying the framework should reflect domestic business practices and the sector’s varied cash-flow patterns. The Finance Ministry supports examining the rules because MSMEs have differing working-capital requirements and business cycles. Under the existing framework, loan accounts are classified as Special Mention Accounts based on overdue periods of 30, 60 and 90 days. A loan is generally classified as a non-performing asset when interest or principal remains overdue for more than 90 days. Nageswaran said the transition to the initial classification stages could itself have serious consequences for borrowers, even before an account formally becomes an NPA. Speaking at the 21st National Conference of Inclusive Growth organised by Sa-Dhan, he said the Reserve Bank of India should consider norms aligned with Indian business practices instead of applying a uniform global framework. He also said ease of doing business affects MSMEs more than large companies, as smaller enterprises face a disproportionate compliance burden in both time and money. Nageswaran said the Union government had been pursuing grassroots deregulation for MSMEs for nearly two years under the Cabinet Secretary’s leadership. Reducing compliance costs, he said, would allow businesses to direct scarce resources towards operations, hiring and employment generation. He identified deregulation, skill development, improved use of trade agreements and state-specific development models as priorities for MSME growth. He also urged microfinance institutions to avoid over-lending and mis-selling, particularly as artificial intelligence and digital sales expand. He said savings and insurance should receive priority before credit. Nageswaran further highlighted the need to upskill workers, noting that AI may reinforce India’s opportunity to pursue labour-intensive growth because of its workforce and demographic advantages. He also pointed to forthcoming opportunities for Indian goods and services from the United Kingdom and European Union trade agreements.