Union Finance Minister Nirmala Sitharaman, along with Minister of State for Finance Pankaj Chaudhary, on Thursday launched the New Credit Assessment Model for MSMEs.
The development followed the post-Budget interaction at Vishakhapatnam, and the assessment model is based on the scoring of MSMEs’ digital footprints.
This credit assessment model will leverage digitally fetched and verifiable data available in the ecosystem and devise automated journeys for MSME loan appraisal using objective decision-making for all loan applications and model-based limit assessment for both Existing to Bank (ETB) as well as New to Bank (NTB) MSME borrowers, the Ministry of Finance said in a statement.
According to the ministry, the digital footprints used by the model may include name and Pan authentication through NSDL, mobile and email verification via OTP, API fetch of GST data through service providers, bank statement analysis using account aggregator, ITR upload and verification, API-enabled commercial and consumer bureau fetch, due diligence using CICs, fraud checks, and Hunter checks through APIs, among others.
The benefits to MSMEs by using this model include submission of application from anywhere through online mode, reduced paperwork and branch visit, instant in-principle sanction through digital mode, seamless processing of credit proposals, end-to-end straight-through process (STP), reduced turnaround time (TAT), credit decision based on objective data/ transactional behaviour, and credit history, and no physical collateral securities for loans covered under CGTMSE, among others.
The credit assessment model for MSMEs based on digital footprints is expected to be a significant improvement over the traditional assessment of credit eligibility based only on asset or turnover criteria, but will also cover MSMEs without a formal accounting system.
The scheme was announced in the Union Budget 2024-25, stating that Public Sector Banks (PSBs) will build their in-house capability to assess MSMEs for credit instead of relying on external assessment.