Union Finance and Corporate Affairs Minister Nirmala Sitharaman, accompanied by Pankaj Chaudhary, Minister of State for Finance, has introduced a new digital Credit Assessment Model designed to enhance credit evaluation for Micro, Small and Medium Enterprises (MSMEs). Announced as part of the Union Budget 2024-25, this initiative aims to modernise the lending process by leveraging digital data-driven assessments.
The launch took place during a post-budget interaction in Visakhapatnam, where the Finance Minister engaged with industry stakeholders, tax professionals and business leaders. The innovative model will empower Public Sector Banks (PSBs) to develop in-house credit assessment capabilities, reducing their dependence on external evaluation agencies.
This model relies on digital footprints to determine an MSME’s credit eligibility. By integrating verifiable and real-time financial data, it automates the loan appraisal process, ensuring efficient and objective decision-making for both Existing to Bank (ETB) and New to Bank (NTB) MSME borrowers.
The model incorporates advanced digital verification mechanisms, including:
- PAN and name authentication via NSDL
- OTP-based mobile and email verification
- GST data retrieval through API-enabled services
- Bank statement analysis using the Account Aggregator framework
- Income Tax Return (ITR) upload and validation
- Real-time credit and fraud risk assessment via credit bureaus and Hunter checks
The digitised credit assessment framework is set to transform the MSME lending process, offering several advantages:
- Convenience: Online loan applications from anywhere
- Minimal documentation: Less paperwork and fewer branch visits
- Faster loan approvals: Instant in-principle sanctioning via digital verification
- Seamless processing: Straight-through Processing (STP) for end-to-end efficiency
- Quicker Turnaround Time (TAT): Data-driven approvals based on financial behaviour
- No physical collateral required: Loans under CGTMSE will be collateral-free
This tech-driven approach represents a paradigm shift from traditional credit assessments based on asset valuation and turnover. By leveraging digital data sources, the new model will increase financial inclusion and provide greater credit access to MSMEs, especially those lacking formal accounting structures.
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