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U GRO Capital, small business lending fintech platform, on Wednesday announced that it has filed an application with the Indian Patent Office for its distinguished methods and systems for modelling scorecards. This has allowed the company to penetrate in a highly unstructured segment, which is driven by physical processes.

The model tackles the unavailability of appropriate MSME database, by utilizing its unique classification technique leveraging the proprietary knowledge base and strength of statistical models.

The underwriting model generates credit score cards customised to suit the peculiarities and nuances of varied business enterprises. This is done by analysing the historical loan delinquency patterns and cash flow within each selected business segment. The model’s utility is not restricted to businesses, as it enables effective underwriting of individual borrowers, the company said. Further, it facilitates trade financing by providing assessment of downstream and upstream counterparties. Also, it provides a basis for revenue sharing in co-lending arrangements and helps estimate first loss guarantees in securitization of transactions by providing an assessment of the underlying pool.

The lending firm has been using this model in 2018. The company has made disbursals of 1,700 crore secured and unsecured loans. "This model is tested to predict superior predictable defaults and improve the GNPA and NNPA levels in comparison to the traditional underwriting model and also improve the bureau defined predictable defaults of different score level," it mentioned. "Going forward, the company aims to target 250,000 SME and MSMEs and extend loans amounting to over 30,000 crore in the coming four financial years," it stated.

Commenting on the patent application, Shachindra Nath, executive chairman and managing director of U GRO Capital stated, “We believe that MSME financing in India is at the verge of transformation with the combination of GST, Banking Data and emergence of digital infrastructure which is underpinning this transformation."

"U GRO Capital’s scorecard based underwriting model lies at the centre of our mission to solve the unsolved credit gap of the SMEs. The underlying methods and system are the convergence of our deep sectoral knowledge base and our analytics capabilities. Our distinctive underwriting model compliments the digitalised processes, to provide a quick and convenient access of credit to our MSME customers," he added.

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