Unique credit analytics and digital interface to be key differentiator
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Bank of Baroda, India’s leading and trusted bank with a network of 9,500 branches, has announced a memorandum of understanding (MoU) with CRISIL Ltd, a leading, agile and innovative global analytics company, for assessing the credit quality of its existing and prospective customers in the small and medium enterprises (SME) segment.
CRISIL will assess the SMEs by processing and analysing structured, unstructured and new data streams through www.smefirst.com, its digital platform, and Quantix, its proprietary platform for data and analytics. CRISIL aims to transform access to credit for SMEs by leveraging its decades of experience in analysing credit.
While loans to SMEs have grown at around 13% annually over the past decade, accounting for nearly 15% of bank credit today, SMEs have been dependent on informal channels of finance because of lack of granular data and credit assessment mechanisms. Access to credit is critical for SMEs to grow, especially since they are the backbone of the economy with around 6.3 crore of them employing over 11 crore people and accounting for 29% of India’s GDP and 40% of exports.
P.S Jayakumar, MD & CEO, Bank of Baroda said, “The MSME sector requires a lot of support from large banks like ours as they generate maximum employment generation in the country. While Bank of Baroda already had a sizable book on SME lending, post-amalgamation our pan-India presence will enhance the bank’s business in this space as the share of the SME segment in the total loan book would increase significantly. Our tie-up with CRISIL will strengthen the evaluation process of SMEs and enable growth of the SME lending business.”
Says Ashu Suyash, Managing Director and CEO, CRISIL Ltd, “The SME lending market, at Rs 18 lakh crore, presents a great opportunity for banks and providers of analytics like CRISIL, given the low levels of penetration. Increased digitalisation of the economy, availability of new data sources such as GST, in addition to traditional financial data and non-traditional data sources, allow for new analytics-based grading of SMEs. CRISIL’s suite of research and analytical tools, deep institutional intelligence, and experience from grading and assessing 1.45 lakh SMEs, will enable faster and improved credit decisioning. The MoU with Bank of Baroda is a step in this direction.”
Bank of Baroda will also leverage CRISIL’s SME cluster study services for ongoing intelligence on business prospects at both sector and geography levels. This will afford it a focussed approach to grow its SME lending business across identified clusters and industries based on evaluation of opportunities and risks.
Added V.S. Khichi, Executive Director, Bank of Baroda, “The biggest challenge in this sector has been the availability of finance. If an SME does not receive financial support from banks, they typically tend to fall back on either the promoter's own savings or borrowings from family and friends. We hope that this partnership will help identify businesses that will aid the India growth story of tomorrow.”
CRISIL’s grading indicate the relative creditworthiness of SMEs based on an eight-point scale, where 1 indicates the highest creditworthiness and 8 poor creditworthiness. The credit evaluation process includes proprietary analytics and tools such as the CRISIL Financial Sensitivity Model, and peer analytics and benchmarks based on information gleaned from over 60,000 enterprises.
“CRISIL’s SME cluster study generates sharp insights at both location and sector levels based on a combination of deep domain expertise and analytics, and primary and secondary research,” said Amish Mehta, Chief Operating Officer, CRISIL. “That gives lenders actionable market insights on SMEs.”