Tuesday saw the inauguration of the MSMEs FIT Rank ranking system by credit agency TransUnion CIBIL and online lending marketplace Online PSB Loans. To determine the likelihood that an MSME would become a non-performing asset (NPA) in the upcoming 12 months, the system will use company data such as GST, bank statements, and income tax reports. An MSME would be ranked on a scale of 1 to 10 based on its financial, income, and trade statistics.

The riskiest firm would be one with a FIT Rank of 1, and the least dangerous would be one with a FIT Rank of 10. Each FIT level is related to a “Probability of Default” (PD), therefore the lower the FIT rank, the lesser the perceived risk of default for the MSME.

TransUnion CIBIL released a statement saying, “This is the first time TransUnion CIBIL has developed a credit default predictor model based on financial, income, and trade data which has been made possible due to the improved digitization in the credit industry.” TransUnion CIBIL collaborated with Online PSB Loans on the project.

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27 lakh MSMEs used to credit during the previous fiscal year, of which 11.6 lakh MSMEs were new to credit or first-time borrowers. However, according to the CIBIL MSME Rank (CMR) model, more than 9 lakh MSMEs (58%) of the 15.4 lakh remaining current borrowers were classified as belonging to the medium-risk group (CMR-4 to CMR-6) of borrowers.

“The FIT Rank ranks MSMEs based on their GST, Banking, and ITR data, enabling more than five times the risk differential in this medium-risk group. The statement said, “Banks and credit institutions may comfortably lend and offer financial support to many more MSMEs since they can analyze credit risk using this thorough rating methodology.

At the FIT Rank launch, TransUnion CIBIL MD & CEO Rajesh Kumar stated, “It is crucial to driving access to financial possibilities for many more worthy MSMEs throughout the country’s geography in order to enhance paths to attaining the objective of making India a $5 trillion economy.

One of the main barriers to the expansion of credit in the industry is the absence of a comprehensive, one-stop source of information on MSMEs.

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TransUnion CIBIL data revealed that over 90 lakh MSMEs had CMRs between 1 and 6, showing that there are many eligible MSMEs that fall into the stable credit risk category and can be given credit chances for expanding their operations. The government’s Atmanirbhar Bharat initiative will be supported by FIT Rank, according to Jinand Shah, managing director of Online PSB Loans. “We believe that FIT Rank will be able to help India’s credit industry in significantly scaling portfolio growth while also supporting the government’s Atmanirbhar Bharat initiative,” he added.