New Delhi: The government has introduced a new Credit Assessment Model for MSMEs, aiming to streamline loan approvals by using digital footprint-based scoring. Finance Minister Nirmala Sitharaman and Minister of State for Finance Pankaj Chaudhary launched the model during a post-Budget interaction in Visakhapatnam.
Announced in the Union Budget 2024-25, the model enables public sector banks (PSBs) to evaluate MSME creditworthiness independently, reducing reliance on external credit ratings. It moves away from traditional asset or turnover-based assessments and extends credit evaluation to MSMEs that lack formal accounting systems.
How the Digital Credit Assessment Model Works
The new model leverages digitally verifiable data to automate MSME loan appraisal processes. It integrates various sources, including:
- PAN authentication through NSDL
- Mobile and email verification via OTP
- GST data retrieval via API services
- Bank statement analysis using account aggregators
- ITR uploads and verification
- Credit information from commercial and consumer bureaus
- Fraud detection through API-enabled checks
With these features, PSBs can assess creditworthiness based on transactional behavior rather than relying solely on collateral or traditional financial statements.
What MSMEs Gain from the New Model
The government expects this model to simplify the loan process for MSMEs by:
- Reducing paperwork and branch visits through online applications
- Speeding up loan approvals with instant in-principle sanctions
- Enabling faster credit decisions based on objective financial data
- Eliminating physical collateral for loans covered under the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)
- Reducing turnaround time by automating credit assessments
This initiative is part of the government’s broader strategy to enhance MSME access to credit, aligning with digital transformation efforts in the banking sector.