Enthused by the initial round of digital-footprint-based lending, the government is nudging public sector banks (PSBs) to increase the threshold for such loans to around Rs 1-2 crore from Rs 50 lakh. The enhanced thresholds could enable them to collectively achieve around Rs 1 lakh crore loan disbursement through this new model in 2025-26.
It was announced in the Union Budget 2024-25 that PSBs will build their in-house capability to assess MSMEs for credit, based on the scoring of digital footprints of MSMEs, such as PAN, Goods and Service Tax and Income Tax data, electricity bills, etc. The new model is an alternative to relying on the traditional assessment of credit eligibility based only on asset or turnover criteria.
The country’s largest bank by assets, State Bank of India, started the digital-footprint-based lending from January 2025, while other PSBs started from April of the current financial year. The digital lending has reached around Rs 70,000 crore so far since January. Of this, SBI alone accounts for around Rs 56,000 crore, including its achievement of around Rs 30,000 crore in Q4FY25. So far in FY26, the digital-data-based lending has reached around Rs 40,000 crore for all PSBs.
“For the whole of FY26, we are expecting digital-assessment-based lending of about Rs 1 lakh crore, with SBI expected to do Rs 75,000 crore and other PSBs together Rs 25,000 crore,” an official said.
Acknowledging the challenge to achieve the stiff target, officials said banks have been asked to utilise their six months of experience to standardise such loans and think of larger amounts. The PSBs, other than SBI, can increase the ticket size up to Rs 1-2 crore, they said.
The benefits to MSMEs by use of this model includes submission of application from anywhere through online mode, reduced paperwork and Branch visit, instant in-principle sanction through digital mode, seamless processing of credit proposals, end to end straight through process (STP), reduced turnaround time (TAT), Credit decision based on objective data/ Transactional behaviour and credit history, no Physical collateral securities for loans covered under CGTMSE, among others.
Banks have been asked to go full digital for the Pradhan Mantri Mudra Yojana (PMMY). The PMMY was launched on April 8, 2015, by Prime Minister Narendra Modi to provide collateral-free institutional credit of up to Rs 20 lakh through Member Lending Institutions. Currently, the application process is fully digital, not the documentation and disbursement.