FIT Rank for MSMEs

December 23, 2022

TransUnion CIBIL and Online PSB Loans Limited (OPL), under the mentorship of SIDBI, collaborated to launch the FIT Rank for MSMEs.

What is FIT Rank?

FIT Rank is a comprehensive ranking model that leverages the information obtained from GST, bank statements and income tax returns (ITR) to increase access of MSMEs to formal credit facilities.
This is the first-ever credit default predictor model developed by CIBIL in collaboration with OPL.
This ranking model can predict the probability of an MSME becoming a non-performing asset (NPA) using machine learning algorithms.
It provides ranking for the MSME, based on the financial income, and trade data on a scale of 1 to 10. The FIT Rank 1 is the least risky MSME and FIT rank 10 is the most at-risk MSME.
Each FIT rank corresponds with the Probability of Default (PD). When the FIT Rank is lower, the perceived risk of default by the MSME is low.
This model was developed due to the increased digitization of the credit industry.

What is the significance of the FIT Rank?

The FIT rank model triangulates information from multiple sources to provide a unified view of the financial, income and trade data of a particular MSME. This ensures an accurate risk differentiation of MSMEs. This enables the banks to confidently deliver credit facilities to more MSMEs and increase the credit growth of the sector.

Only around one-third of MSMEs in India received loan from the formal credit system. The new model expands the risk underwriting parameters of the MSMEs based on multiple data sources and makes more MSMEs eligible for formal credit facilities. This will help in the realization of the full potential of India’s MSME sector.

The model will especially benefit new-to-credit MSMEs, which do not have any credit history. It enables banks and other financial institutions to objectively assess such MSMEs and process loans more effectively.

Using the data provided by the FIT rank, SIDBI has launched a new Express Loan Product for MSMEs to offer loans up to Rs.50 lakh to purchase machinery and roof-top solar installations via the straight-through-process.

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