The Reserve Bank of India (RBI) has included the Good and Service Tax Network (GSTN) as a financial information provider under the account aggregator framework. The latest move is aimed at facilitating a cash flow-based lending to micro, small and medium-sized enterprises (MSMEs). The department of revenue will be the regulator of the GSTN for furnishing returns on the goods and services tax (GST).
GST returns filed in GSTR-1 and GSTR-3B will be the financial information. In 2016, the RBI released the framework for registration and operation of an account aggregator framework in India.
In essence, an account aggregator enables the sharing of data between individuals and financial institutions. Lenders can thereby review this information before providing a loan to an individual or an entity. So far, around a billion accounts, 17 banks, and 48 non-bank lenders have been enabled on the account aggregator framework.
“Inclusion of GSTN will give way to the traditional approach of lending based on balance sheet similar to how it is used for registering an MSME on the Udyam portal now. So rather than depending on some projection-based data to lend, of which the veracity cannot be confirmed, cash flow-based data with GST details will bring a great change to MSME lending,” a SIDBI official told Aspire seeking anonymity.
SIDBI is also into direct lending to MSMEs apart from providing financial support to small financial institutions and banks which in turn lends out money to MSMEs. “It (GSTN inclusion in AA framework) will also benefit SIDBI significantly since we are also into direct lending,” the official added.
For NBFCs in India, many of which are into MSME lending, GSTN inclusion will provide the most authentic picture of the borrower to lenders in the credit decisioning process. Raman Aggarwal, Director at Finance Industry Development Council, a representative body of NBFCs in India, told Aspire, “GSTN provides another level of comfort because one can fudge his/her financial books but not the GST data. Hence, this will reduce the time to disburse credit by banks.
Particularly for NBFCs, “this is going to have a very positive impact as NBFCs lending to MSMEs don’t expect any collateral. As of now GSTN data has been confidential information but now it will be accessible after required approvals,” Aggarwal noted. Moreover, this will “also nudge MSMEs to comply more with GST regulations,” said Abhishek Basumallick, Chief Equity Advisor at equity research firm Intelsense.
Notably, a challenge assumed in the success of AAs is reluctance from MSMEs to give consent to data sharing. However, a survey of over 1,000 MSMEs by Boston Consulting Group earlier this month noted that around 40 per cent of respondents are willing to share their data provided they get personalised offers from banks such as lower interest rates, discount on processing charges, better customer experience etc
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