Budget proposal of Grameen Credit Score to help credit discipline: Experts

It will weed out fraudulent borrowers and self-help group members, they say

The Union Budget’s proposal for public sector banks to have a Grameen Credit Score (GCS) framework for self-help groups is expected to help finance in rural areas and enforce repayment discipline.

 

The proposal fits well with the needs of the financial sector, said M V Rao, chairman of Indian Banks’ Association and managing director and chief executive officer, Central Bank of India, in a statement. The Budget has focused on further push to the flow of institutional financial resources to farmers, MSMEs and exports and above all maintaining financial discipline.  ALSO READ: Budget 2025: Tax relief, policy push to boost electric two-wheeler demand

 

 

Jiji Mammen, executive director and CEO of Sa-Dhan, said the GCC framework is a good idea that will help improve credit discipline in microfinance and weed out fraudulent borrowers.

 

The Budget proposal should be seen as part of the thrust given to agriculture, rural development, employment creation and enterprise promotion. It can improve economic conditions in rural India and strengthen microfinance, bankers said.

 

The GCC framework will enhance access to credit for self-help group members and people in rural areas, said Seema Prem, co-founder and CEO of FIA Global, which provides technology-enabled last-mile delivery of banking services to the underserved.

 

Prem said the business correspondent network will be crucial in facilitating the alternate credit score by creating a ‘digital footprint’ and visibility of financial transaction history for improved credit assessment by banks.

 

Private sector banks and small finance banks dominate joint liability group (JLG) financing largely due to their differentiated approach. They check CRIF Highmark and CIBIL scores for approving loans. This along with use of assessment tools like Fixed obligation to Income Ratio helps ensure creditworthiness, according to NABARD’s report status of Microfinance in India Fy24.