Finance Ministry Developing New Home Loan Product Based on Digital Footprints: Financial Services Secretary
The Finance Ministry is making strides in revolutionizing the lending process by developing a new credit assessment model for home loans based on an individual’s digital footprints. This innovative approach aims to provide home loans to individuals whose creditworthiness is not easily determined through traditional means.
Following the announcement of a new credit assessment model for MSMEs in the Budget, Financial Services Secretary Vivek Joshi revealed that a similar product is in the works for the housing sector. Under this new model, banks will consider the digital footprints of individuals, such as their consumption and spending patterns, to assess their creditworthiness.
Joshi highlighted the challenges faced by smaller businesses, particularly in the MSME sector, in obtaining loans due to the lack of proper balance sheets. The new model will enable banks to evaluate the creditworthiness of these businesses based on their digital footprint, such as payroll data and EPF contributions.
Furthermore, the Ministry is discouraging the requirement for external credit ratings for MSMEs seeking loans below a certain threshold limit. Instead, banks are encouraged to conduct their own internal ratings to streamline the lending process and reduce the financial burden on small businesses.
Overall, the development of this new credit assessment model for home loans signifies a significant step towards financial inclusion and accessibility for individuals who may not meet traditional lending criteria. With banks leveraging digital footprints to assess creditworthiness, more individuals and businesses are expected to benefit from easier access to loans.