Loan threshold for MSMEs under the digital footprint model raised to ₹10 Crore
NEW DELHI : The government has urged public sector banks (PSBs) to extend loans up to Rs 10 crore through the newly launched digital footprint-based credit assessment model from Rs 25 lakh to Rs 5 crore now, to accelerate seamless credit flow to the micro, small and medium enterprises (MSMEs).
On March 6, the new credit assessment model based on the scoring of digital footprints of MSMEs such as GST payment data, cashflow, electricity bills, etc. The PSBs have built their in-house capability to assess MSMEs for credit, instead of relying on external assessment.
The State Bank of India (SBI), which was working on this product for some time, is extending loans up to Rs 5 crore to MSMEs while other PSBs are processing loans between Rs 25 lakh to Rs 2 crore under the automated credit assessment model, cutting down the intervention and discretion of bank branch managers.
“We are trying to push a little more larger customers also to come in this net. Over the next one or two years, PSBs should be doing loans up to Rs 10 crore for MSMEs based on their digital footpint,” an official told.
While no target is being fixed as of now as their systems will take some time to stabilise, the finance ministry will monitor what percentage of PSBs loans for MSMEs are happening through this automated model. Based on the customer feedbacks, the product would be reviewed to popularise it.
Official acknowledge some challenges that need to be addressed. If MSME is a proprietor account, the data is easily shared through account aggregator to the lending banks, but if it is a partnership account, account aggregator is today not enabled.
“So, we are asking RBI to ensure come up with some solution that account aggregator enables multiple signatory accounts,” the official said.
In the case of partnership accounts, most of the banks are currently allowing PDFs. So, customers can upload a PDF, which could be checked automatically. ITR check is also still not fully automated. But, most of the banks have waived it off for now.
The credit assessment model for MSMEs based on digital footprints 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.
It is estimated that the credit gap for the MSME sector ranges from Rs 15 lakh crore to Rs 45 lakh crore as no formal survey has been conducted in the recent times to project the actual gap.