FM Sitharaman launches new credit assessment model for MSMEs

Union Finance and Corporate Affairs Minister Nirmala Sitharaman on Thursday launched a new credit assessment model based on the scoring of digital footprints of MSMEs in the country.

Sitharaman, along with Minister of State for Finance Pankaj Chaudhary, was interacting with industry leaders and other stakeholders, including tax professionals, during a post-Budget interaction in Visakhapatnam.

This was one of the announcements made in the Union Budget 2024-25 that public sector banks (PSBs) will build their in-house capability to assess MSMEs for credit, instead of relying on external assessment. PSBs will develop a new credit assessment model, based on the scoring of digital footprints of MSMEs in the economy.

“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 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,” she said.

Sitharaman disclosed that 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 FM detailed.

She said 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,” Sitharaman added.