GST as a credit risk assessment tool will help reduce NPAs for SMEs

SMEs and MSMEs are the major growth engines of economies that rely on banks and financial institutions to help with their funding needs. Banks and financial institutions need solutions to help them navigate through multiple challenges of minimizing lending risks, securing data, streamlining credit operations, and safeguarding their profitability

Mumbai: Inclusion of GST data as a parameter for credit risk assessment will help reduce NPAs for banks and financial institutions in SMEs and MSMEs lending. Talking to Bizz Buzz, Niraj Hutheesing, Founder and Managing Director of Cygnet Infotech, says: "All evaluations related to credit risk assessment and lending processes for SMEs/MSMEs now should also have indirect tax (GST data) as a parameter. This data allows lenders to monitor the credit worthiness for loan performance as an early warning, this will tremendously decrease the number of NPAs in the market."

As a differentiator Cygnet FinTech works on the data cash flow-based model that help lending institutions build a customer-centric model for credit underwriting. Since e-invoice is a mandate now, the invoice discounting/trade financing can be validated too. Banks want to focus on customers/prospects that are new to the space to generate more credit opportunities and give impetus to lending, and hence are collaborating more with fintech companies. Such fintech companies like Cygnet Fintech will enable these banks get consent-based data points from multiple data sources like ITR, MCA, GST, bank statements and more for analysing and making informed credit decisions, he said.

Cygnet [KS1] Infotech, a leading technology company with its clients across India, North America, Europe, Middle East, and Africa, announced grouping of its products and solutions for the Fintech space under the Cygnet Fintech brand.

SMEs and MSMEs are the major growth engines of economies that rely on banks and financial institutions to help with their funding needs. Banks and financial institutions need solutions to help them navigate through multiple challenges of minimizing lending risks, securing data, streamlining credit operations, and safeguarding their profitability.

To meet such challenges, Cygnet Fintech offers solutions such as credit assessment and decisioning platform which comprises of GST data analysis, bank statement analysis, ITR and financial statement analysis, underwriting model, invoice verification for trade finance or bill discounting and more. These offerings equip banks, NBFC's, and other financial institutions with data, financial ratios, and insights for a better credit assessment to reduce risk and turnaround time for credit underwriting decisions. With a rich experience in technology, Cygnet Fintech also assists to digitize lending journeys from onboarding till disbursement.

Cygnet Fintech will build on Cygnet Infotech's existing base of customers who would want to leverage its credit risk assessment solution for BFSI sector and also improve compliance of vendor ecosystem for manufacturing sector. These solutions will enable credit managers, business heads and product heads make informed decisions to drive sustainable growth. Irrespective of the borrower ticket size, these offerings will help them quickly analyze borrower creditworthiness and digitize the entire lending journey from customer onboarding to loan disbursement for improved customer experience.

On what kind of risks are there on the space, he said that banks and financial institutions would like to ensure that their financial decisions are driven by robust set of data, to minimize lending risk.

Given Cygnet Infotech's prior experience in working with some of India's largest banks and NBFCs, we are well placed to help them implement connected systems for digitized processes and make smart decisions. This in turn ensures that the funding needs of SMEs are addressed, which is crucial to the economy [KS2], he added.

From a lender perspective, the challenges include increase in number of non-performing assets, manual journeys, customer attrition, ability to identify the credit risk of the borrower, specific set of data that may or may not give a full view on the borrower's credit worthiness. [RB3] For the borrower it's a challenge to collate and provide multiple sets of data and documents for evaluation purpose.

Coming expectation from Indian market, he said that the expectation is to move lenders from traditional asset-based lending to cash flow based lending. Fully digitized journeys from manual or partial digital based processes. Grow trade finance domestically and internationally significantly. Creating lending opportunities for importers and exporters. Banks and NBFCs to digitally give impetus for lending, insuring and account holding journey using the data driven approach and offer the cash flow-based funding opportunities to SME/MSME sectors.