PSBs Sanction Over ₹52,300 Crore MSME Loans Through Digital Credit Model

Public sector banks have accelerated MSME lending through digital credit assessment systems introduced in 2025. 

Between April and December 2025, these banks sanctioned more than 3.96 lakh loan applications, amounting to over ₹52,300 crore. 

The initiative uses data-driven credit evaluation to streamline loan processing and improve access to formal credit for small businesses.

Digital Credit Assessment Framework

Public sector banks introduced a Credit Assessment Model that evaluates MSME loan applications using verified digital data. 

The system analyses applicants’ digital footprints and automates key stages of loan appraisal. 

It is applicable to both existing and new banking customers and supports model-based credit limit assessments.

Use of Digitally Verified Data

The model integrates multiple data sources to assess borrower eligibility. These include digital KYC verification, mobile and email authentication, GST records, income tax return validation, bank statement analysis through account aggregators, credit bureau checks and fraud risk screening, as per The Economic Times report.

This approach enables objective and consistent credit decision-making.

Benefits for MSME Borrowers

The digital process allows MSMEs to submit loan applications online without extensive paperwork or repeated branch visits. Applicants can receive in-principle approvals through automated systems, reducing turnaround time. 

Loan decisions are based on transactional behaviour and credit history, supporting transparent evaluation.

Integration With Credit Guarantee Schemes

The framework also connects MSME borrowers to credit guarantee programmes, helping improve credit accessibility while managing lending risks for banks. 

This integration is expected to support broader financial inclusion within the MSME sector.

Read More: Bank Nifty Slips Over 400 Points on Jan 19; RBI Lending Observations and Global Cues Drag.

Conclusion

The adoption of digital credit underwriting by public sector banks reflects an ongoing shift towards technology-led lending practices. By relying on verified data and automated appraisal systems, the model aims to enhance efficiency in MSME financing while improving borrower access to formal banking channels.

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