Next to agriculture, the MSME sector is the backbone of the Indian economy, with about 30% of its GDP. The government is considering measures such as raising the deposit acceptance limit of eligible non-banking finance companies (NBFCs), introducing deposit insurance, and providing a dedicated liquidity window for NBFCs to reduce their cost of funds so that they can extend loans to key sectors such as agriculture and MSME at cheaper interest rates, two officials said. There is an urgent need to expand formal but affordable credit facilities through NBFCs if India has to become the world’s third-largest economy by 2030, the officials said, requesting anonymity. “Interest rates charged by NBFCs are, however, high, which may go up to 26%, depending on the nature of loans. Interest rates are high because the cost of funds for NBFCs is high compared to commercial banks. Hence, various proposals are under consideration to reduce their costs,” said one of them.