MSMEs Can Now Access Loans Up to ₹10 Crore with Digital Footprint Model

The Indian government has urged public sector banks (PSBs) to expand their digital footprint-based credit assessment model for micro, small, and medium enterprises (MSMEs). This initiative aims to streamline credit flow and reduce dependency on traditional asset-based evaluations.

Expansion of Digital Credit Model for MSMEs

On March 6, a new credit assessment model was introduced to evaluate MSMEs based on their digital footprints, including GST payment data, cash flow, and electricity bills. Public sector banks have developed in-house capabilities to assess creditworthiness, eliminating the need for external assessments.

The State Bank of India (SBI) is now offering MSME loans up to ₹5 crore through this model, while other PSBs are processing loans between ₹25 lakh and ₹2 crore. An official stated, “We are trying to push a little larger customers also to come into this net. Over the next one or two years, PSBs should be doing loans up to ₹10 crore for MSMEs based on their digital footprint.” The finance ministry will monitor the percentage of loans disbursed through this system and refine it based on customer feedback.

Challenges and Adaptations in Implementation

Challenges remain, especially with partnership accounts, as the account aggregator system currently supports only proprietorship accounts. “So, we are asking RBI to come up with some solution that accounts aggregator enables multiple signatory accounts,” the official said. To address this, banks are allowing MSMEs to upload PDFs for verification, which are checked automatically.

Additionally, Income Tax Return (ITR) verification is not fully automated, but most banks have temporarily waived this requirement. Despite these hurdles, the new model is expected to improve credit access for MSMEs, especially those without formal accounting systems.

Conclusion

The digital footprint-based credit assessment model is set to enhance MSME financing by reducing manual intervention and improving credit accessibility. With an estimated credit gap of ₹15 lakh crore to ₹45 lakh crore, this initiative aims to bridge the financial divide and support business growth.

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