Sitharaman Launches New Credit Assessment Model For MSMEs in AP

Visakhapatnam: Union Minister for Finance and Corporate Affairs Nirmala Sitharaman on Thursday launched the New Credit Assessment Model for MSMEs, as announced in the Union Budget 2024-25, at a function here on Thursday.

The benefits to MSMEs by using the model include submission of application from anywhere through online mode, reduced paperwork and branch visit, instant in-principle sanction through digital mode, seamless processing of credit proposals, end to end straight through process (STP), reduced turnaround time (TAT), credit decision based on objective data/transactional behaviour and credit history, no physical collateral securities for loans covered under Credit Guarantee Fund for MSMEs (CGTMSE), among others.

The model is based on digital footprints and is expected to be a significant improvement over the traditional assessment of credit eligibility based only on asset or turnover criteria. That will also cover MSMEs without a formal accounting system. Along with Sitharaman, Union Minister of State for Finance Pankaj Chaudhary and several senior officials from the Central Board of Direct Taxes (CBDT), Ministry of Finance, Customs and Income Tax Departments and others were present. Sitharman also took part in a discussion on the Union Budget after attending the release of a book by Dr Daggubati Venkateswara Rao.

The model will leverage digitally fetched and verifiable data to devise automated MSME loan appraisal. In the post-budget interaction, the first of its kind in Andhra Pradesh, the Union Finance and Corporate Affairs Minister, and the MoS launched the New Credit Assessment Model based on the scoring of digital footprints of MSMEs. It was announced in the Union Budget 2024-25 that public sector banks (PSBs) will build their in-house capability to assess MSMEs for credit, instead of relying on external assessment. PSBs will develop a new credit assessment model, based on the scoring of digital footprints of MSMEs in the economy.

The credit assessment model will leverage the digitally fetched and verifiable data available in the ecosystem and devise automated journeys for MSME loan appraisal using objective decisioning for all loan applications and model-based limit assessment for both Existing to Bank (ETB) as well as New to Bank (NTB) MSME borrowers.

The digital footprints used by the model may include name and PAN authentication using NSDL, mobile and email verification using OTP, API fetch of GST data through service providers, bank statement analysis using account aggregator, ITR upload and verification, API enabled commercial and consumer bureau fetch and due diligence using CICs, fraud checks, Hunter checks through APIs, among others.