In a move to enhance credit access for Micro, Small, and Medium Enterprises (MSMEs), Union Finance and Corporate Affairs Minister Nirmala Sitharaman, along with Minister of State for Finance Pankaj Chaudhary, launched the New Credit Assessment Model at the Post Budget interaction in Vishakhapatnam today. This initiative aligns with the Union Budget 2024-25 announcement, where Public Sector Banks (PSBs) were directed to develop in-house credit assessment capabilities instead of relying on external assessments.
The newly introduced model will utilize digital footprints to evaluate MSMEs’ creditworthiness, leveraging verifiable and digitally fetched data available in the ecosystem. The automated credit appraisal process will ensure objective decision-making for all loan applications, facilitating model-based limit assessments for both Existing to Bank (ETB) and New to Bank (NTB) MSME borrowers.
- 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 used by the model may include Name and Pan authentication using NSDL, Mobile and email verification using 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 and due diligence using CICs, fraud checks, Hunter checks through APIs, among others.
- The benefits to MSMEs by use of this model includes 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, 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. That will also cover MSMEs without a formal accounting system.
