Nirmala unveils digital credit assessment model

In a move aimed at revolutionising lending to the crucial Micro, Small, and Medium Enterprise (MSME) sector, India’s Union Finance and Corporate Affairs Minister, Nirmala Sitharaman, unveiled a new digital credit assessment model during a post-budget interaction in Visakhapatnam.
The initiative, announced in the Union Budget 2024-25, seeks to empower Public Sector Banks (PSBs) to conduct in-house creditworthiness assessments of MSMEs, moving away from reliance on external evaluations. This digital model leverages a comprehensive array of data, automating the loan appraisal process for both existing and new bank clients.
The system will analyse digital footprints including Name and PAN authentication, mobile and email verification, GST data, bank statement analysis, ITR uploads, and commercial and consumer bureau checks. Fraud detection mechanisms will also be integrated, ensuring robust due diligence. “This is a significant step towards democratising access to credit for MSMEs,” said Sitharaman. “By utilising digitally verifiable data, we are enabling faster, more efficient, and objective loan assessments.”
The new model promises to streamline the loan application process, allowing MSMEs to submit applications online, reducing paperwork and branch visits. Instant in-principle approvals, seamless credit proposal processing, and end-to-end straight-through processing (STP) are expected to significantly reduce turnaround times for credit decisions.
A key feature of the initiative is the shift from traditional asset or turnover-based credit eligibility assessments to a more data-driven approach, focusing on transactional behaviour and credit history. Critically, loans covered under the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) will not require physical collateral securities.
“This will be particularly beneficial for enterprises lacking formal accounting systems, broadening financial inclusion,” stated Minister of State for Finance, Pankaj Chaudhary, who also attended the launch. The government hopes that this digital transformation will strengthen the MSME ecosystem, a vital component of the Indian economy. By providing inclusive and efficient credit availability, the initiative aims to fuel growth and create employment opportunities across the country.