The Union Finance Ministry has introduced a new Credit Assessment Model designed for Micro, Small, and Medium Enterprises (MSMEs). The initiative was launched by Finance Minister Nirmala Sitharaman and Minister of State for Finance Pankaj Chaudhary following a post-Budget interaction in Visakhapatnam. This model leverages digitally verifiable data to assess MSME creditworthiness, streamlining loan appraisal and decision-making. It applies to both Existing to Bank (ETB) and New to Bank (NTB) MSME borrowers, facilitating an automated and objective credit evaluation process. The model utilizes various digital footprints, including name and PAN authentication, mobile and email verification, GST data, bank statement analysis, income tax return verification, and commercial and consumer credit bureau data. Additionally, due diligence measures such as fraud checks and risk assessments are conducted through API-enabled systems. The new framework offers several advantages to MSMEs. Loan applications can be submitted online, eliminating the need for physical paperwork and branch visits. The system ensures instant in-principle approvals, seamless processing, and reduced turnaround time. Decisions are based on objective financial data, transactional behaviour, and credit history, rather than just asset holdings or turnover. Furthermore, loans covered under the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) do not require physical collateral. Announced in the Union Budget 2024-25, the initiative aims to enhance the in-house credit assessment capabilities of Public Sector Banks (PSBs), reducing reliance on external evaluations. By incorporating digital footprints, the new model is expected to improve access to credit, particularly for MSMEs lacking formal accounting systems. News source: The StatesmanImage source: moneycontrol