FM Sitharaman Unveils Digital Driven Credit Model to Empower MSMEs
Finance Minister Nirmala Sitharaman, along with Minister of State for Finance Pankaj Chaudhary, unveiled a new Credit Assessment Model for MSMEs. The model that is built on digital footprints guarantees quicker and more convenient credit assessments for small businesses.
Unveiled in the Union Budget 2024-25, the program was intended to bolster public sector banks (PSBs) to gauge MSME creditworthiness in-house, freeing them from the necessity of taking external evaluations. The launch was made at a post-Budget interaction in Visakhapatnam, where Sitharaman underlined the potential of the model to change MSME lending.
Unlike older models based on asset or turnover statistics, the new model is built on digitally verifiable data to provide a more dynamic and expansive evaluation, even for MSMEs lacking formal accounting mechanisms. The model will facilitate auto loan appraisal experiences, applying objective decision-making to Existing to Bank (ETB) and New to Bank (NTB) borrowers alike.
The digital footprint score incorporates PAN and identity verification through NSDL, OTP-enabled mobile and email authentication, GST data retrieval from service providers, bank statement analysis through account aggregators, ITR validation, commercial and consumer bureau report, and fraud check through API-enabled services.
This digital-first strategy has several advantages for MSMEs: online submission of applications, less paperwork, fewer branch visits, immediate in-principle loan sanction, credit processing reduced to the essentials, shorter turn-around times, and data-driven credit approvals. Importantly, loans under the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) would be collateral-free.
With the combination of real-time data analysis and automation, the new model is set to democratize access to credit, enabling MSMEs to obtain faster, more secure funding. The action reflects the government's dedication to nurturing growth in the sector, which is a key driver of the Indian economy.
With this project, MSMEs have to expect an uncomplicated, clear, and seamless credit environment leading the way towards rapid business development and innovation across the country.
