Lifeblood of the Indian economy, Micro, Small & Medium Enterprises (MSMEs) have always found themselves in hot water when it comes to timely and affordable credit. Furthermore, constraints such as complex and time-consuming banking processes, favours, add to the struggle.

Taking a collaborative step towards transformation, India’s Public Sector Banks (PSBs) have executed a New Digital Credit Assessment Model, an initiative announced in the Union Budget 2024-25 for MSME lending, and successfully sanctioned 98,995 MSME loan applications, between April 1 and July 15, 2025, using this model. (Source: PIB)

The above steps indicate the adoption and success of the digital transformation across the public financing sector, in terms of speed and efficiency, for MSME borrowers.

What is the New Digital Credit Assessment Model?

Launched as part of the government’s modernisation drive for MSME finance, the model was officially launched in March 2025 as a digitally updated, tech-driven version that standardised the appraisal and sanctioning process to drive financial inclusion, efficiency, and transparency, while retaining the regulatory safeguards for MSME loans.  Adopted by Public Sector Banks (PSBs) for lending to Micro, Small & Medium Enterprises (MSMEs), the New Digital Credit Assessment Model replaces traditional, manual, and paper-based credit appraisal mechanisms with a fully digital, automated, and objective system.

What are its key features?

• Catering a full-length digital experience: Giving freedom to MSME borrowers to apply for loans online from the comfort of their home/office.
• Automated Evaluation: Working on the algorithms and digital data of the applicants (such as Credit scores, Bank statements via Account Aggregator framework, PAN via NSDL, GST and Income tax returns, the model takes minimal time in evaluating applications.
• Fast: Decreasing manual review time, the model helps in completing loan application processing and sanctioning within one day.
• Minimal human errors: Since decisions are automated, transparency and consistency in the process increase, which further leaves minimal/zero chances of subjectivity and human errors.
• Enhanced Data Verification: Features such as One Time Password (OTP) based digital authentication, fraud detection, Programming Interfaces and data mining from trusted sources ensure and enhance data accuracy and security at every step.

What are its key benefits for MSME borrowers?

• Convenience: No more physical branch visits and loads of paperwork.
• Transparency: Automated process erases the possibility of human errors (minimal), thus increasing trust and accountability.
• Improved Financial Access: By utilizing their digital transactional records and compliance data, businesses with limited collateral or short credit histories can showcase their creditworthiness to apply for a loan.

Bottomline: becoming the gold standard for the emerging economies for SME Financing

The model envisions an accessible, transparent, faster and fairer future for SME financing, not just in India, but globally. This is a major step for driving technology and financial inclusion for small businesses and giving a tech-driven makeover to Public Sector Banking’s financing process for MSMEs to strengthen their financial wings.