According to a report published in Business Standard, Public Sector Banks or PSBs shall launch a fresh credit risk assessment process for loans between Rs 25 lakh and Rs 5 crore to micro, small, and medium enterprises or MSMEs.
Bank of India, Punjab & Sind Bank, Canara Bank and Indian Bank are likely to roll out the model on November 25 while six other PSBs like Bank of Baroda (BoB), Union Bank of India, UCO Bank and Punjab National Bank would look at launching it by November 30.
During her Budget speech in July, she stated that PSBs will lead this initiative of creating an internal credit assessment system by using the digital footprints of MSMEs, and not rely on third-party assessment systems.
This is a model that attempts to be a significant improvement over the traditional system that emphasises measures on the asset or turnover basis. It will also help MSMEs that do not maintain formal accounting systems.
Indian Bank and the State Bank of India (SBI) will consider sanctioning credit up to Rs 5 crore using this model. In the initial phase, nine PSBs such as Bank of Baroda, Canara Bank and Bank of Maharashtra will sanction credit up to INR 25 lakh while Bank of India will sanction credit up to Rs 1 crore.
Small and Medium Enterprises (SMEs) are essential for India’s economy, accounting for more than 30% of the country’s GDP and almost 50% of its exports.
Sitharaman had mentioned that the credit guarantee scheme of Rs 100 crore for MSMEs, which the government has proposed in the Budget, would soon be placed before the Union Cabinet for approval. The scheme is one of the measures to be taken up for MSMEs during their trying times, as reported in Business Standard.
“The credit guarantee scheme will be placed before the Cabinet soon, and once approved, it will be implemented through the MSME Ministry and banks,” she said at the National MSME Cluster Outreach Programme.
This model will use digital data and other factors to assess loan eligibility, making it more accurate than traditional models that only look at assets or turnover.
