Banks revamp underwriting as MSME delinquencies emerge

BANKS AND NON-BANKING finance companies (NBFCs) are recalibrating their underwriting models as early signs of stress emerge in the micro, small and medium enterprise (MSME) segment.

- KSHIPRA PETKAR

Rising delinquencies, particularly in smaller ticket-size loans, are prompting lenders to adopt more nuanced credit assessment frameworks.

"We're expanding our distribution and leveraging data analytics to improve credit assessment and risk management," Manish Kothari, group president & head - commercial banking at Kotak Mahindra Bank, said.

Kotak expects rural India to be an important banking opportunity in next five-seven years.

Lenders are integrating alternative data such as GST filings, cash-flow patterns, verified business transactions, timely utility payments, digital footprints, and supply chain data to gain a more holistic view of a borrower's creditworthiness.

Another criterion that lenders look at is whether a borrower has taken multiple unsecured loans.