Union Finance and Corporate Affairs Minister Smt. Nirmala Sitharaman and Minister of State for Finance Shri Pankaj Chaudhary launched a new Credit Assessment Model based on the scoring of digital footprints of MSMEs.
This initiative was unveiled during the Post Budget interaction in Vishakhapatnam today, as part of the Union Budget 2024-25 announcements.
The newly introduced credit assessment model aims to enable Public Sector Banks (PSBs) to independently evaluate MSME creditworthiness, eliminating the need for external assessments. This innovative approach leverages digitally verifiable data within the ecosystem to automate MSME loan appraisals using objective decision-making criteria for both existing-to-Bank (ETB) and New to Bank (NTB) MSME borrowers.
Key components of the digital footprints used by the model include Name and PAN authentication via NSDL, mobile and email verification through OTP, API fetch of GST data, bank statement analysis using account aggregators, ITR upload and verification, API-enabled commercial and consumer bureau fetch, and due diligence checks, among others.
The advantages for MSMEs are considerable, encompassing online application submission, reduced paperwork and branch visits, instant in-principle sanction through digital channels, seamless credit proposal processing, an end-to-end straight-through process (STP), reduced turnaround time (TAT), and credit decisions based on objective data. Notably, there will be no physical collateral required for loans covered under CGTMSE.
This credit assessment model for MSMEs is set to surpass traditional methods of credit evaluation, which relied heavily on assets or turnover, thereby also including MSMEs without formal accounting systems.
