Data has become the lifeblood of decision-making, in present times. Financial institutions are constantly seeking innovative ways to leverage data to refine their strategies and offer better services to their clients. One such revolutionary avenue is the utilization of GST data for lending purposes. This article talks about the transformative potential of harnessing real-time GST data to optimize lending strategies, the benefits of GST data for lending, and how it facilitates more informed decisions and fosters economic growth.
The Significance of GST Data
GST, a consumption-based tax, has emerged as a treasure trove of information about businesses’ financial health and activities. By requiring businesses to report their transactions, it provides a comprehensive view of their operations, cash flows, and growth trajectories. This data, when properly harnessed, can offer invaluable insights to financial institutions for making lending decisions that are timely, accurate, and risk-averse.
Acquiring GST Data for Lending Purposes
The data within GST returns is both intricate and pertinent in the context of lending. These returns include GSTR-1 for outward supplies, GSTR-2A & GSTR-2B for purchases, and GSTR-3B for a monthly summary and tax payment. These diverse returns comprise detailed invoice-level information as well as aggregated data, which are essential for constructing credit and underwriting models.
Nonetheless, the GST portal only provides access to public data, encompassing fundamental registration details, ongoing status, and the historical record of filed returns, along with their filing chronology. Read more about it here: Start using GST Data for lending.
To directly access the information disclosed in the GST Returns, the borrower, who is the taxpayer, must grant consent through OTP authentication. An alternative approach involves gathering data from borrowers through PDFs or spreadsheets, but this method carries the inherent risk of data tampering. Consequently, sourcing data directly from its origin, namely the Government system – the GSTN portal in this instance, is a comparatively more reliable and secure approach.
Benefits of GST Data-Based Lending
Real-time Insights: GST-based loans utilize real-time data from GST returns, enabling lenders to access up-to-date information about a borrower’s financial transactions, revenue, and tax liabilities. This data ensures that lending decisions are based on the most current business performance.
Customized Loan Offers: With comprehensive data from GST returns, lenders can tailor loan offers to match the specific financial needs and capabilities of each borrower. This customization enhances the borrower’s experience and increases the likelihood of loan approval. Insights extracted from GST data empower lenders to construct precise and individualized profiles of loan applicants. Armed with this information, banks and lenders can create tailored loan packages featuring competitive interest rates that cater precisely to borrowers’ unique requirements.
Cost Reduction: The utilization of GST data for credit underwriting is a mutually beneficial strategy. It not only aids lenders and banks in mitigating operational costs but also offers MSMEs and other businesses cost-reduction benefits. By employing authentic data, the reliance on resource-intensive processes diminishes, substantially lowering lending risks.
Reduced Documentation: The reliance on GST data reduces the need for extensive documentation typically required for loan applications. This simplifies the process for borrowers and minimizes administrative burdens.
Accurate Risk Assessment: Lenders can make more accurate risk assessments by analyzing a borrower’s transaction patterns, tax compliance history, and financial ratios derived from GST data. This ensures that loans are extended to businesses with strong repayment capabilities.
Faster Disbursements: With streamlined processes and quicker approvals, borrowers can access funds faster, enabling them to seize timely business opportunities and address immediate financial needs.
Empowering Trade Financing and Boosting MSME & SME Loans – Consent-driven access to GST data allows small businesses to establish a credible transaction history within their supply chain. This comprehensive data footprint provides a true depiction of the financial standing of MSMEs/SMEs, opening avenues for trade financing. Additionally, it facilitates loans against invoices for these smaller enterprises, as the creditworthiness and reliability of counterparties can be gauged through their GST data.
IRIS Credixo – Your GST Data Lending Partner
IRIS Credixo offers a set of APIs covering publicly available GST data and consent-based data filed in GST returns. Additionally pre-processed data sets, reports and insights are also available as enhanced data APIs which can quickly plug into any system. Banks, lending institutions and fintechs’ can integrate these APIs in their credit models and provide faster and seamless lending experience to the MSMEs.
IRIS Credixo APIs can embed into your existing credit appraisal or loan origination systems. Alternatively, institutions can also build new applications and expand to new use cases based on the GST data available.
A full-blown web-application is already set up for IRIS Credixo, which helps data users i.e., the banks and fintechs to visualize the spread of GST data for lending.
Credixo stands at the intersection of Data and Lending Experience. It allows lenders to grow volumes, stand out from the competition and gather meaningful customer data to provide seamless “lending in the box” credit experience and design tailored customer journeys.
