Know what will be the impact on the loan process of new credit appraisal model for MSME

Banks will not depend upon any third-party or turnover information to give loans to Micro, Small, and Medium Enterprises (MSMEs). Banks will develop in-house capacity in lieu of depending upon external appraisal. It will be completely digital and database-based. Finance Minister Nirmala Sitharaman and Minister of State for Finance Pankaj Choudhary launched the new credit appraisal model on Thursday. The introduction of such a model was suggested in the budget presented in July a year ago for the financial year 2024-25.

With this model, MSMEs will not have to go to a bank or elsewhere to obtain a loan. They can apply for a loan from anywhere with this model and there will be no paperwork to be executed. Another advantage of utilizing this medium will be that the loan will be approved in principle immediately through a digital medium.

Loan proposals can be processed without any hindrance, less time will be taken in operation and service delivery, and loans can be given fairly and transparently based on data. There will also be no need to provide any collateral for the loan under the Credit Guarantee Fund Trust for Micro and Small Enterprises. Under the new model, digital and verifiable available data of the applicant will be used. This will also make it easier for new entrepreneurs associated with MSME to get a loan.

Name and PAN will be verified using National Securities Depository Limited, e-mail and phone number will be verified with the help of OTP, financial analysis will be done from income tax returns and bank statements. Commercial and consumer information of the applicant will be taken with the help of the Application Programming Interface (API). The applicant's image will be checked with the help of digital data.