**Summary:**
The Ministry of Finance introduced a New Digital Credit Assessment Model for Micro, Small, and Medium Enterprises (MSMEs) to streamline loan approvals. Officially launched on March 6, 2025, following its announcement in the Union Budget 2024-25, the model empowers Public Sector Banks (PSBs) to internally assess MSME creditworthiness by leveraging digital footprints, reducing reliance on external assessments and physical documentation.
The model uses digitally sourced and verifiable data, including PAN authentication (via NSDL), mobile and email verification (via OTP), GST data (via API), bank statement analysis (via account aggregators), ITR uploads and verification, commercial and consumer bureau data (via CICs), and fraud checks (via APIs). This facilitates automated loan appraisal journeys and objective decision-making for both existing (ETB) and new (NTB) MSME borrowers.
While the fundamental eligibility criteria for MSME loans remain unchanged, the new model simplifies the loan sanctioning process, offering a user-friendly and standardized approach. From April 1 to July 15, 2025, PSBs sanctioned 98,995 MSME loan applications using this model. Loan decisions are made within a maximum of one day, significantly reducing the turnaround time compared to traditional manual methods.
Benefits for MSMEs include online application submission, reduced paperwork and branch visits, instant in-principle sanctions, seamless processing, and credit decisions based on objective data and transactional behavior. The digital process reduces subjectivity, fraudulent submissions, and decision-making errors, leading to faster, more transparent, and objective credit assessments. Banks' Business Rule Engines (BREs) will capture all risks as per their credit risk management policies.
This information was provided by Minister of State in the Ministry of Finance Shri Pankaj Chaudhary in a written reply to a question in Lok Sabha.
Key Entities Referenced
Ministry of Finance: The government ministry responsible for financial matters.
New Digital Credit Assessment Model for MSMEs: A new model designed to fast-track loan approvals for Micro, Small and Medium Enterprises (MSMEs) by leveraging real-time digital data.
Union Budget 2024-25: The annual financial statement of the Union government of India, presented for the fiscal year 2024-2025.
Public sector banks (PSBs): Banks in which the government has a majority stake.
National Securities Depository Limited (NSDL): An Indian central securities depository.
Goods and Services Tax (GST): An indirect tax used in India on the supply of goods and services.
Credit Information Companies (CICs): Companies that collect and provide credit information on borrowers.
Shri Pankaj Chaudhary: Minister of State in the Ministry of Finance.
Ministry of Finance
New Digital Credit Assessment Model for MSMEs
leverages real-time digital data to fast-track loan
approvals for MSMEs
Revolutionizing MSME lending, the model enables
faster, objective, and fully digital loan assessments,
significantly reducing paperwork, processing time,
and reliance on physical documentation
Posted On: 28 JUL 2025 5:49PM by PIB Delhi
The New Digital Credit Assessment Model for MSMEs was announced in the Union Budget 2024-25. The
model envisioned that the Public sector banks (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. Subsequently, Union Finance Minister had
launched the New Credit Assessment Model for MSMEs on 6th March, 2025.
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 digital footprints used by the model may include Pan authentication using National Securities Depository
Limited (NSDL), Mobile and email verification using OTP, Application Programming Interface (API) fetch
of GST data through service providers, Bank Statement Analysis using account aggregator, ITR upload and
verification, API enabled commercial and consumer bureau fetch and due diligence using Credit Information
Companies (CICs), fraud checks, through APIs, among others. The model is live with all banks with different
loan amount threshold.
Under Traditional / Manual methods, banks rely on physical documents submitted by customers for manual
underwriting. While under new credit assessment model, credit request and data submission as well as
assessment is done entirely through digital process.
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 standardized
approach by relying on digitally available data.
Between 1st April and 15th July, 2025, a total of 98,995 MSME loan applications have been sanctioned by
the Public Sector Banks (PSBs) under New Credit Assessment Model.
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.
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 & assessment is done entirely through digital process which
reduces subjectivity, fraudulent submission of credit information & 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.
This information was given by Minister of State in the Ministry of Finance Shri Pankaj Chaudhary in a
written reply to a question in Lok Sabha today.
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(Release ID: 2149373)