The new framework is designed to aid MSMEs that often lack formal documentation and have trouble obtaining loans. The model will use digital data from business-related activities such as employee salary payments, utility bills, and bank transactions to assess the creditworthiness of businesses, especially small MSMEs that do not have balance sheets.

The new approach is expected to save MSMEs the costs of obtaining external ratings and provide them with more accessible, low-cost loans. The initiative also integrates with the Rs 100-crore Credit Guarantee Scheme, which will allow MSMEs to secure loans without third-party guarantees or collateral.

With an estimated credit gap of Rs 20-25 lakh crore for MSMEs, this model aims to bridge the funding shortfall, particularly for smaller businesses. This shift from traditional credit assessments to a digital-first approach marks a significant step in enhancing credit availability for MSMEs.