A total of 98,995 MSME loan applications have been sanctioned by the public sector banks (PSBs) under New Credit Assessment Model between April 1 and July 15 this year, the government has informed.

Bank loans through new digital credit assessment model are decided within maximum of upto one day significantly reducing the turn around time (TAT) as compared to manual methods, said Minister of state for Finance, Pankaj Chaudhary, in a written reply to a question in the Lok Sabha.

The benefits to MSMEs by use of this 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, reduced TAT, credit decision based on objective data/ transactional behaviour among others.

Under the new model, credit decision is based on objective data/ transactional behaviour and credit history of the borrower. Further, credit request submission and assessment is done entirely through digital process which reduces subjectivity, fraudulent submission of credit information and error in decision making.

This enables faster, transparent and more objective assessment of creditworthiness using system-generated credit logic and scorecards. Business Rule Engines (BREs) of banks will capture all risks as per its credit risk management policy, said the minister.

The New Digital Credit Assessment Model for MSMEs was announced in the Union Budget 2024-25. The model envisioned that the PSBs will build their in-house capability to assess MSMEs for credit, instead of relying on external assessment.

PSBs would develop a new credit assessment model, based on the scoring of digital footprints of MSMEs in the economy.

The model leverages the digitally fetched and verifiable data and devises 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 introduction of the new digital credit assessment model does not involve any fundamental changes in the basic eligibility criteria for MSME loans in terms of regulatory norms or policy guidelines of individual bank. However, it simplifies the process of sanctioning loans and offers a more user-friendly and standardised approach by relying on digitally available data, according to the government.