FinnOne Neo®
Lending
Transaction Banking
Financial Inclusion
India’s micro, small and medium enterprises have always been the backbone of its economy – but something’s changed. They’re no longer just unregistered, informal entities tucked away in lanes and by-lanes. With over 5.93 crore businesses registered on the Udyam portal, the MSME landscape has gone digital, visible, and ready for credit.
For financial institutions, this isn’t just another policy wave – it’s a rare, high-impact moment. Between Priority Sector Lending (PSL) mandates, data-rich public infrastructure, and modern lending technology, there’s now a clear path to scale MSME lending – not just responsibly, but profitably too.
So, how do lenders move from fragmented pilot projects to a full-scale MSME credit engine? Let’s break it down.
Related Read: How Digital Can Bridge the Gap in MSME Lending?
The Udyam Revolution: A Borrower Base You Can Trust
The Udyam portal has done what few imagined possible – brought India’s vast informal economy into a structured, verifiable fold. It’s a ready-made KYC pipeline with enormous depth.
- 93 crore MSMEs registered as of Feb 2025.
- Contributing ~30% of India’s GDP.
- 18 crore jobs supported.
- Fully linked to PAN, GST and Aadhaar.
This is not just a registry. It’s a goldmine for segmentation, digital onboarding, and instant verification – without the paperwork drag.
Why Traditional Lending Models Just Won’t Cut It?
MSMEs today aren’t just Kirana shops or machine part suppliers. They’re digital-first, API-connected, operating on marketplaces, CRMs, ERPs – and they need credit delivery models that match that energy.
This is where AI-driven end-to-end lending platforms like FinnOne Neo® come into play, enabling banks and NBFCs to ditch rigid core dependency and move fast with modern, low-code lending infrastructure.
| Capability | Why It Matters for MSME Lending? |
|---|---|
| Low-Code Product Setup | Launch and tweak loan products without calling IT |
| API-First Architecture | Plug into Udyam, GSTN, Credit Bureaus, and more |
| AI-Led Underwriting | Score thin-file MSMEs using GST, cash flows, and invoice trails |
| STP Automation | Process thousands of loans with minimal effort |
| End-to-End Lifecycle | Handle onboarding to collections on one system |
Not All MSMEs Are the Same – And Neither Should Their Loans Be
One-size-fits-all credit is a thing of the past. Today, lenders can get razor-sharp in designing products based on enterprise type, segment, behavior, or geography. And yes, you can do this without hardcoding workflows each time.
Examples of Segment-specific MSME Credit
- GST-based working capital for tax-compliant MSMEs.
- Invoice discounting linked to GeM or TReDS.
- Women-led enterprise loans with CGTMSE coverage.
- Embedded finance for MSMEs in EV, agri or ecommerce value chains.
Digital configurability isn’t just a backend win, it’s what helps you stay relevant to the borrower at the front end.
Here’s what a modern, scalable MSME lending technology looks like:
| Strategic Lever | What It Enables |
|---|---|
| Udyam Data Integration | Instant authentication + segmentation |
| Real-Time PSL Tracking | Monitor exposure by sector, geography |
| CGTMSE Automation | Auto-coverage, digital claim filing |
| Alt Data Models | Use GST, invoices, bank feeds for credit scoring |
| Fintech APIs | Plug into ERPs, AAs, marketplaces |
| Low-Code Frameworks | Empower business teams to launch products fast |
What Should Financial Institutions Prioritize Today?
- Leverage Udyam: Leverage the rich, structured data from the Udyam platform for faster MSME onboarding, segmentation, and verification.
- Balance Compliance and Profitability: Align PSL obligations with risk-mitigated lending via CGTMSE guarantees to build sustainable MSME portfolios.
- Invest in Configurable Lending Platforms: Adopt modern, composable loan management systems that allow you to rapidly launch new credit products, customize workflows, and scale across MSME segments with minimal operational friction.
- Create Segment-Specific Offerings: Use data-driven rule engines to offer bespoke MSME credit products – from invoice-based loans to cluster-based financing.
- Automate at Scale: Embrace an end-to-end platform that delivers on explainable AI, alternate data, and partner APIs to digitize the full loan lifecycle – from lead to collection.
- Future-Proof with Ecosystem Readiness: Position your institution to integrate with evolving national platforms like Account Aggregators, TReDS, and ONDC for MSMEs.
Related eBook: Cracking the Code: The Essential Guide to SME Lending Success
Closing Note: A ₹25 Trillion Opportunity Awaits
MSMEs are the real growth engine – and they’re not waiting around. With rising digital adoption and regulatory support, the stage is set for financial institutions to rewrite the rules of engagement.
With FinnOne Neo® at the core, Financial Institutions can optimize MSME lending.
