MSMEs to Benefit from Faster Loans as New Digital Credit Assessment Model Goes Live
New Delhi, July 29: In a significant boost to India’s Micro, Small and Medium Enterprises (MSMEs), the Ministry of Finance has operationalised a fully digital credit assessment model that promises to revolutionize the lending process. Announced in the Union Budget 2024–25, the New Digital Credit Assessment Model has already facilitated the sanctioning of nearly 99,000 MSME loan applications between April 1 and July 15, 2025, the government said on Monday.
Minister of State for Finance Pankaj Chaudhary, in a written reply to the Lok Sabha today, said the new model enables faster, more objective, and paperless credit evaluations by leveraging real-time digital data. “The loan appraisal process is now driven by system-generated logic, reducing paperwork, processing delays, and human subjectivity,” he noted.
The model empowers public sector banks (PSBs) to independently assess MSME creditworthiness based on digital footprints instead of relying on traditional physical documentation or external assessments. Key digital data sources include PAN authentication via NSDL, GST filings, bank statement analysis through account aggregators, income tax return verifications, and credit bureau reports fetched via APIs.
“This initiative simplifies the lending process without altering basic regulatory eligibility norms. It allows MSMEs to apply online, receive in-principle sanction instantly, and expect a credit decision within a day,” the Ministry said.
Unlike traditional underwriting methods where loan officers manually scrutinize hard copies, the new system automates the journey from credit request submission to final decision. It also integrates fraud detection and due diligence processes using APIs and credit information companies (CICs), ensuring secure and reliable lending.
The business rule engines of individual banks govern the risk assessment process according to each institution’s credit policy, ensuring standardisation without compromising flexibility.
Among the key benefits for MSMEs are:
- Online, anytime application submission
- Reduced paperwork and branch visits
- Faster, transparent credit decisions
- Credit evaluation based on actual financial behaviour and data
- Lower chances of errors or fraudulent submissions
The initiative aligns with the government’s broader push for digital financial inclusion and aims to make credit more accessible and efficient for India’s small businesses.
