Union Finance Minister Nirmala Sitharaman on Thursday introduced the New Credit Assessment Model that relies on the scoring of digital footprints of MSMEs (micro, small, and medium enterprises) during a post-Budget dialogue in Visakhapatnam.
Minister of State, Finance Pankaj Chaudhary was also present at the occasion.
In her Union Budget 2024-25 speech, the finance minister stated that public sector banks (PSBs) will develop their internal ability to evaluate MSMEs for credit, rather than depending on external assessments.
A Finance Ministry statement said that, “This credit assessment model will leverage the digitally fetched and verifiable data available in the ecosystem and devise automated journeys for MSME loan appraisal using objective decisioning 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 digital footprints utilized by the model could encompass Name and Pan verification by NSDL, Mobile and email confirmation using OTP, GST data retrieval through service providers via API, Bank Statement Analysis through account aggregators, ITR upload and verification, API-driven fetch from commercial and consumer bureaus and due diligence using CICs, fraud assessments, Hunter checks using APIs, among other elements.
The advantages for MSMEs using this model encompass the ability to submit applications from any location via online platforms, minimized paperwork and visits to branches, immediate in-principle approval through digital means, smooth processing of credit requests, a complete end-to-end straight-through process (STP), shorter turnaround time (TAT), credit decisions rooted in objective data, transactional behavior, and credit history, and no need for physical collateral securities for loans under CGTMSE, among other benefits.
“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. That will also cover MSMEs without a formal accounting system,” added the finance ministry.
