Nirmala Launches New Credit Assessment Model for MSMEs

Visakhapatnam: Union Finance Minister Nirmala Sitharaman launched the new credit assessment model based on “the scoring of digital footprints” of MSMEs here on Thursday.

Notably, it had been announced in the recent Union Budget that public sector banks will build their in-house capability to assess MSMEs for credit- instead of relying on external assessment.

“This credit assessment model will leverage the digitally fetched and verifiable data available in the ecosystem and devise automated journeys for MSME loan appraisals, promising 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 minister told the participants of a budget-interaction session.

The digital footprints used by the model may include name and Pan authentication using National Securities Depository Limited (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 from the 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, reduced turnaround time, credit decision based on objective data and transactional behaviour and credit history, and no physical collateral securities for loans covered under CGTMSE, among others.

This credit assessment model 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.