What is the primary purpose of the new credit assessment model launched for MSMEs in India?

The correct answer is To use digitally fetched data for automated MSME loan appraisals.

In News

• The Union Finance Minister and MoS, Finance launched a new credit assessment model for MSMEs leveraging digital footprints.

Key Points

• The model uses digitally fetched data such as Name and PAN authentication, GST data, and bank statement analysis for MSME loan appraisals.
• The new system provides instant in-principle sanctions and reduces the paperwork and branch visits for MSMEs.
• The model aims to improve loan processing speed, reduce turnaround time (TAT), and offer credit based on objective data.
• It enables MSMEs without a formal accounting system to apply for loans, improving accessibility for smaller businesses.

Additional Information

• Digital Footprints
  • Digital footprints refer to data that can be collected electronically, such as bank statements, GST records, PAN details, and mobile verification, which are used for the credit assessment process.
  • By using these footprints, the new model automates and streamlines the loan application process, making it faster and more transparent.
• CGTMSE
  • The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) is a scheme that provides credit guarantees to financial institutions to encourage lending to MSMEs.
  • This new credit assessment model allows MSMEs to access loans under the CGTMSE scheme without the need for physical collateral, promoting ease of access to finance.
• Straight Through Process (STP)
  • STP refers to the automatic, seamless processing of transactions or processes without manual intervention.
  • In this context, it ensures faster loan processing and reduced waiting times for MSME applicants.
• Turnaround Time (TAT)
  • TAT refers to the total time taken to process a request or transaction from start to finish.
  • The new credit assessment model aims to significantly reduce the TAT for MSME loans, making the system more efficient and accessible.