PSBs Sanction Nearly 99,000 MSME Loans Using New Digital Credit Model
Public Sector Banks (PSBs) in India have sanctioned a total of 98,995 MSME loan applications between April 1 and July 15, 2025, under a newly launched Digital Credit Assessment Model, according to recent data shared by the Ministry of Finance.
Minister of State for Finance, Pankaj Chaudhary, highlighted the significant improvements brought in by the model in a written reply to a query raised in the Lok Sabha. The revamped approach to credit evaluation enables quicker and more accurate sanctioning of MSME loans, often providing decisions within a day a major shift from the longer turnaround times seen with traditional manual processing.
Launched as part of the Union Budget 2024–25, the digital model marks a shift towards data-driven, tech-enabled credit decisioning for MSMEs. Instead of relying on external credit assessment agencies, PSBs are now building in-house digital capabilities that assess borrower profiles based on verifiable, system-generated data.
The credit assessment is fully automated and evaluates factors such as transactional history, digital footprint, and credit scores. These inputs are run through Business Rule Engines (BREs) aligned with each bank’s internal risk management framework, resulting in objective, transparent and faster decision-making.
Key Benefits for MSMEs
The digital model offers a range of benefits for micro, small and medium enterprises:
- Online application submission from any location
- Reduced paperwork and minimized need to visit bank branches
- Instant in-principal approvals
- Seamless digital processing of loan proposals
- Reduced Turnaround Time (TAT) for sanctioning
- Less subjectivity and lower chances of fraudulent data entry
By leveraging digital infrastructure, the system allows for standardised and user-friendly loan journeys that are equally effective for both existing clients (ETB) and first-time borrowers (NTB).
While the model modernizes how loan applications are processed, it does not alter the fundamental regulatory eligibility norms set by the Reserve Bank of India or individual banks. Rather, it enhances operational efficiency by digitizing processes that were previously manual and prone to inconsistency or delays.
The rollout of this digital model is part of a broader effort by the Indian government to promote technology-led financial inclusion and strengthen MSME access to formal credit. With over 63 million MSMEs forming the backbone of India’s industrial and services sectors, improving their access to timely and transparent credit is seen as a critical enabler of economic growth.
The move also aligns with India’s larger vision of “Digital Bharat”, using AI, fintech and automation to reshape the delivery of financial services at scale.
As PSBs continue to refine their internal assessment frameworks and integrate more contextual datasets, this model could evolve into a benchmark for MSME lending practices not just in India, but across emerging markets looking to improve credit access through digital innovation.
