India has approximately 70,000 hospitals. Private facilities account for nearly 62 percent of them. The overwhelming majority are small and mid-sized — 20 to 200 beds, often family-run, operating in Tier 2 and Tier 3 cities, structured as proprietorships or small private companies. In the government's classification framework, most of them are micro or small enterprises.
They share a characteristic that defines their financial lives: when they need working capital, most of them cannot get it from a bank at a competitive rate.
This article is about why that is the case — and why the answer has less to do with the hospitals themselves than with the data infrastructure around them.
The Credit Gap Is Not a Healthcare Problem. It Is an MSME Problem.
India's MSME sector — which is where the vast majority of hospitals sit — faces one of the most well-documented credit gaps in the developing world. The International Finance Corporation has estimated that Indian MSMEs face a financing gap exceeding ₹25 lakh crore. According to IFC estimates, more than 80 percent of MSMEs in India do not receive any formal financing. A SIDBI report published in May 2025 noted that MSMEs lack formal accounting systems, face issues in accessing formal credit, and are unable to provide collateral that banks and financial institutions require.
The problem is structural. Banks lend against verifiable information — audited financials, collateral documentation, credit history, and confirmed receivables. Large enterprises produce this information routinely. Micro and small enterprises, which constitute approximately 99 percent of India's MSME sector according to government classification data, typically do not. They lack formal bookkeeping. They lack audited balance sheets. They lack the kind of collateral — property, fixed deposits — that banks accept as security.
The result is not that these enterprises are uncreditworthy. It is that their creditworthiness cannot be verified through the channels that the formal financial system requires. The credit gap is, at its core, an information gap.
Hospitals are MSMEs that happen to operate in healthcare. They face the identical structural problem — with one important distinction that makes their situation both more frustrating and more solvable than most.
What Makes Hospitals Different
A typical micro-enterprise — a kirana store, a garment workshop, a small manufacturer — generates revenue through transactions that are largely informal, unaudited, and difficult for a bank to verify independently. The credit gap for these enterprises is genuinely hard to close because the data that would prove their creditworthiness does not exist in any structured, verifiable form.
A hospital that treats insured patients is in a fundamentally different position.
India's health insurance ecosystem processed over ₹1.17 lakh crore in premiums in FY 2024–25, covering more than 58 crore lives. Health insurance is now the single largest segment within non-life insurance, contributing over 41 percent of gross direct premiums, according to the IRDAI Annual Report for 2024–25. When a hospital treats an insured patient and submits a claim, and the insurer approves that claim, something unusual happens: a regulated financial institution — an insurance company supervised by IRDAI, subject to solvency requirements — formally confirms that it owes the hospital a specific amount of money.
This is not an informal promise. It is not an unverified invoice from a private buyer. It is a confirmed obligation from a regulated entity, processed through increasingly standardised digital infrastructure. The National Health Claims Exchange — built by the National Health Authority under the Ayushman Bharat Digital Mission — now provides a FHIR-standard platform through which claims data flows between hospitals and insurers. More than 47 insurers and TPAs have connected to the platform. The data that proves a hospital's receivables are real is, in many cases, already being generated on government-built digital infrastructure.
And yet, a hospital sitting on crores of rupees in approved, confirmed insurance claims typically cannot walk into a bank and borrow against them at competitive rates. The receivables exist. The data that verifies them exists. But the bank cannot see it.
The Cost of Invisibility
IRDAI mandates that insurers settle claims within 30 days of receiving complete documentation, with penal interest at 2 percent above the bank rate for delays. The regulator's 2024 Master Circular on Health Insurance Business further tightened timelines, mandating 1-hour pre-authorisation responses and 3-hour discharge authorisation. These are significant regulatory interventions.
But there is a difference between the mandated timeline and the actual settlement timeline. In practice — particularly for smaller hospitals, reimbursement claims, and government scheme claims — the gap between claim approval and cash receipt stretches well beyond 30 days. It is not uncommon for hospitals to wait 90 to 270 days for payment on approved claims.
During that gap, the hospital still needs to operate. Staff salaries are due monthly. Medicine suppliers expect payment. Utility bills do not wait for insurer settlements. The hospital needs working capital to bridge the gap between delivering care and receiving payment.
If the hospital has a formal banking relationship and can offer acceptable collateral, it borrows at rates available to creditworthy businesses — perhaps 10 to 14 percent per annum. Most hospitals cannot. They lack the collateral, the audited financials, and the credit history that banks require. So they borrow from whoever will lend — at rates that can range from 18 percent to well above 24 percent per annum, depending on the lender and the hospital's negotiating position.
The arithmetic is straightforward. A hospital doing ₹10 crore in annual insured revenue, with ₹2.5 crore in outstanding approved claims at any given time, borrowing at 24 percent to bridge a 120-day average settlement delay, is paying approximately ₹50–60 lakh per year in interest. On money it has already earned. For claims that have already been approved. By insurers that have already confirmed the obligation.
That interest — ₹50–60 lakh — would otherwise buy medicines, fund equipment maintenance, or pay nursing staff. Instead, it subsidises the information gap between what the insurance system has confirmed and what the banking system can see.
The Structural Irony
There is a structural irony at the heart of India's healthcare financing landscape.
The government has invested significantly in building digital health claims infrastructure. The National Health Claims Exchange, built under the Ayushman Bharat Digital Mission, is one of the most sophisticated health data platforms in the developing world. It uses FHIR standards. It has a participant registry for hospitals and insurers. It has a consent framework for purpose-limited data sharing. It produces digitally signed confirmations of payment obligations. Over 47 insurers and TPAs are connected. IRDAI has actively supported adoption through collaborative workshops and accelerator programmes.
At the same time, the government has invested significantly in expanding MSME credit access. The Credit Guarantee Fund Trust for Micro and Small Enterprises provides collateral-free loan guarantees up to ₹10 crore, recently doubled from ₹5 crore in the 2025 Union Budget. The RBI's priority sector lending guidelines classify healthcare facility loans up to ₹12 crore in Tier II to Tier VI centres as eligible for priority sector treatment. The 2025 Budget introduced the ME-Card scheme for micro-enterprises with a ₹5 lakh credit limit and announced one million cards in the first year.
These are both significant, well-designed policy interventions. But they operate in parallel, not in intersection. The health claims infrastructure generates verified receivable data that could underpin competitive credit for hospitals. The MSME credit infrastructure is actively seeking ways to extend formal financing to underserved enterprises. Neither is connected to the other.
The health claims system does not know that its data has value to lenders. The lending system does not know that verified healthcare receivables exist. And the hospitals — sitting at the intersection, holding approved claims they cannot monetise and needing credit they cannot access — bear the entire cost of this disconnect.
What This Means
The majority of India's hospitals do not lack creditworthiness. They lack visibility. Their receivables are real. The data that proves those receivables are real is increasingly digital, standardised, and government-verified. But none of this data currently flows to the institutions that make lending decisions.
The consequence is not an inconvenience. It is a structural tax on India's healthcare delivery system. It is paid in interest to informal lenders. It is paid in medicines not purchased, equipment not maintained, and staff not retained. It is paid, ultimately, by patients — in the form of care that is more expensive, less resourced, and more fragile than it needs to be.
Two parallel government investments — one in health claims infrastructure, one in MSME credit access — sit separated by a gap that neither was designed to close. The data exists on one side. The demand for credit exists on the other. The hospitals exist in between, paying the cost of a disconnect that grows more expensive with every claim that is approved and every payment that is delayed.
Until then, hospitals will continue to pay the cost of being invisible to the system that should be lending to them.