Finance Minister Sitharaman Unveils Innovative Credit Assessment Model for MSMEs
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Synopsis
On March 6, Finance Minister Nirmala Sitharaman and Minister Pankaj Chaudhary launched a new credit assessment model for MSMEs in Vishakhapatnam, which will utilize digital footprints for evaluating credit eligibility, enhancing the loan application process significantly.
Key Takeaways
- New credit assessment model launched for MSMEs
- Uses digital footprints for credit evaluation
- PSBs to develop in-house assessment capabilities
- Reduces paperwork and turnaround time
- Benefits MSMEs without formal accounting systems
Vishakhapatnam, March 6 (NationPress) Finance Minister Nirmala Sitharaman and Minister of State for Finance Pankaj Chaudhary on Thursday introduced a groundbreaking New Credit Assessment Model that evaluates the digital footprints of MSMEs.
This initiative was revealed during her announcement in the Union Budget 2024-25, where it was stated that public sector banks (PSBs) will develop their own in-house capabilities for assessing MSMEs for credit, moving away from dependence on external evaluations.
Launched during a post-Budget session in Vishakhapatnam, the credit assessment model is set to bring a substantial upgrade over conventional credit eligibility evaluations that primarily consider assets or turnover metrics. It will also include MSMEs lacking formal accounting practices, as per an official announcement.
The PSBs will create a fresh credit assessment framework based on the evaluation of MSMEs' digital footprints in the economy. This model will utilize digitally sourced and verifiable data from the ecosystem, facilitating automated journeys for MSME loan assessments through objective decision-making for all loan requests, along with model-driven limit evaluations for both Existing to Bank (ETB) and New to Bank (NTB) MSME borrowers, as stated.
The digital footprints incorporated by the model may consist of name and PAN authentication via NSDL, mobile and email verification through OTP, API retrieval of GST data via service providers, Bank Statement Analysis through account aggregators, ITR uploads and verifications, API-enabled commercial and consumer bureau data retrieval, fraud checks, and hunter checks through APIs, among others.
The advantages for MSMEs using this model encompass the ability to submit applications from any location online, minimized paperwork and branch visits, immediate in-principle approvals via digital means, smooth processing of credit proposals, end-to-end straight-through processes (STP), shortened turnaround times (TAT), credit decisions grounded in objective data and transactional behavior, and no physical collateral requirements for loans covered under CGTMSE, among other benefits, as noted.
