Finance Minister launches a Digital Credit Assessment Model for MSMEs to speed up Loan Approvals:

Finance Minister launches a Digital Credit Assessment Model for MSMEs to speed up Loan Approvals Smt. Nirmala Sitharaman, Union Finance and Corporate Affairs Minister, and Shri Pankaj Chaudhary, Minister of State for Finance, unveiled the New Credit Assessment Model based on the assessment of MSMEs' digital footprints, during a post-budget discussion in Vishakhapatnam. The Union Budget 2024-25 announced that public sector banks (PSBs) will develop in-house capabilities to assess MSMEs for credit rather than relying on external assessments. PSBs will create a new credit assessment model based on the scoring of MSMEs' digital footprints throughout the economy. This credit assessment model will use the ecosystem's digitally fetched and verifiable data to create automated journeys for MSME loan appraisal, including objective decisioning for all loan applications and model-based limit assessment for both existing to bank (ETB) and new to bank (NTB) MSME borrowers. The model's digital footprints may include Name and PAN authentication via NSDL, Mobile and Email verification via OTP, API fetch of GST data using service providers, bank statement analysis through an account aggregator, ITR upload and verification, API-enabled commercial and consumer bureau fetch and due diligence via CICs, fraud checks, Hunter checks by means of APIs, and others. The benefits to MSMEs by using this model include submission of applications from anywhere using online mode, decreased paper work and branch visits, instant in-principle sanction by the way of digital mode, seamless processing of credit proposals, end-to-end straight through process (STP), shorter turnaround time (TAT), credit decision determined by objective data/transactional behaviour and credit history, and no physical collateral securities for loans covered under CGTMSE, among others. The credit assessment approach for MSMEs based on digital footprints is anticipated to be significantly more effective than standard loan eligibility assessments based solely on asset or turnover criteria. This will also include MSMEs without a proper accounting system.