Question
Download Solution PDFWhat is the primary purpose of the new credit assessment model launched for MSMEs in India?
Answer (Detailed Solution Below)
Option 3 : To use digitally fetched data for automated MSME loan appraisals
Detailed Solution
Download Solution PDFThe 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.