bureau
Transunion Cibil has broad-based its MSME scoring methodology to rank borrowers who lack sufficient documentation to help lenders take a holistic view in assessing their credit worthiness. The new model looks at longer credit history - 36 months from 24 months earlier and does deeper analysis of borrower behaviour. The credit bureau will analyse the repayment record post and pre-COVID period.
“ CreditVision CIBIL Commercial Rank (CV CMR),CV CMR is an objective indicator of borrower’s creditworthiness based on quantitative credit data points submitted by the credit institutions” said Bhavesh Jain, managing director and CEO of Transunion Cibil.
Compared to the earlier model, the newer version offers an extended observation window to the lender as it evaluates 36 months of credit history, offering deeper insights compared to the 24-month window in the previous model in addition to capturing a wider base of borrowers, according to Jain.
Besides the new approach offers enhances risk differentiation as it allows banks and NBFCs assess the risks more accurately by adjusting for the size of love and and type of borrower. “ By leveraging advanced trended algorithms that capture nuanced credit behavior and validating them across large, diverse borrower populations over extended periods, CV CMR delivers sharper segmentation between low- and high-risk borrowers” Jain said.
Additionally, the model integrates product-level characteristics,
accounting for the diverse nature of loan offerings and operational constraints across banks, NBFCs, and FinTech. “ This layered approach ensures the model remains relevant and adaptable across varied lending environments” Jain said. The model ranks borrowers on a scale of one to ten and is based on the observed empirical 90+ days past due default rates. A borrower ranked one caries the least default rate , while a borrower with rank of 10 has the highest default rate — the higher the default rate, the riskier the credit profile. At present there are 94 lakh active commercial borrowers in the MSME sector, higher by one and half times over 2020 levels according to Transunion Cibil. This progress has been aided by initiatives like Pradhan Mantri MUDRA Yojana (PMMY), Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), Government e-Marketplace (GeM),
Trade Receivables electronic Discounting System (TReDs), Open Credit Enablement Network (OCEN), and Open Network for Digital
Commerce (ONDC), creating a ground for commercial lending.
