MSMEs are the backbone of all economies across the globe, propelling innovation, jobs, and regional development. MSMEs contribute nearly 30% of the country’s GDP and employ millions in the Indian economy. Despite their crucial role in the economy, MSMEs have generally faced many challenges in accessing formal credit. Amongst these include lack of documentation, uncertainty, and perceived financial risk, all of which discourage lending to such business enterprises.
Udyam Verification is emerging as a solution to bridge this gap. Providing a simple and reliable way to verify MSMEs, increases the trust quotient, simplifies the lending process, and minimizes the risk quotient. Let’s understand what Udyam verification is all about and what makes it capable of changing the game in MSME lending for businesses and institutions.
What is Udyam Verification?
Udyam verification refers to the confirmation of the registration of an MSME under the guidelines issued by the Ministry of Micro, Small, and Medium Enterprises, Government of India. This confers a unique identification number called the Udyam Registration Number upon every business for recognition as a micro, small, or medium enterprise.
Key Features of Udyam Verification:
- Identity Authentication: The business entity is authenticated using Aadhaar, PAN, and GSTIN.
- Validation Classification Validates the investment and turnover limit for determining the size of the business (micro, small, or medium).
- Documented Recognition: Grants a government-issued certificate that authenticates the MSME’s status.
Current Challenges in MSME Lending
Before pointing out the benefits of Udyam Verification, let us understand the current pain points present in MSME lending.
- Trust Deficit: Most MSMEs are informal. Thus they may lack legitimate financial records or credit history. This creates suspicion about their reliability.
- Time-Consuming Processes: Traditional methods of verifying business credentials involve extensive paperwork and manual assessments, delaying loan approvals.
- Risk of Fraud: By not having the interposed check from a central system, fraudulent entities may be onboarded by lenders.
- Limited Access to Formal Credit: Research has established that most MSMEs raise finances from informal sources as formal financiers are not willing to give them credit.
How Does Udyam Verification Simplify the Process?
Udyam Online Verification has been designed to eliminate the problem using a centralized and trusted verification process. Here’s how this changes the nature of lending:
- Seamless Identity Verification
Udyam Online Verification integrates essential business information such as Aadhaar, PAN, GSTIN, and key financial numbers for an overall MSME profile. This will considerably reduce the need for supplementary documentation through paperwork by both lenders and borrowers.
- Faster Loan Approvals
Access to verified and standardized data has promoted the speedy evaluation of loans. Overall, turnaround times are highly reduced so that funds can reach the MSMEs when they are most required.
- Reduced Fraud Risk
The government-issued Udyam Registration Certificate ensures that only genuine businesses qualify for MSME benefits. This is reassuring to the creditors and not prone to fraudulent loaning.
- Transparent Classification
The proper classification of MSMEs is accurate because loan schemes/benefits fall under specific rules, thereby providing equal lending opportunities.
Transformative Impact on MSME Lending
Udyam Verification adoption can have a ripple effect throughout the MSME lending ecosystem. Here’s how it might play out:
- Building Trust
Udyam certificate verification gives lenders confidence in the credibility of a borrower. Trust opens the doors to formal credit for those borrowers who have never borrowed before and more comprehensive financial access to everyone.
- Encouraging Wider Financial Inclusion
Through simplification of the lending process, Udyam Verification allows MSMEs to access loans best tailored to fit their needs, thus promoting much wider financial inclusion in rural and less accessible areas.
- Reduced Cost of Operations for Lenders
Udyam certificate verification reduces the administrative workload of financial institutions. Thus, it is cost-effective, and they will be able to service more MSMEs without increasing overheads.
- Develop Growth for MSMEs
Access to credit promptly enables MSMEs to invest in business expansion, adopt new technology, and improve their competitiveness in the marketplace.
Closing the Gap in MSME Financing
Udyam Verification is more than just a registration process; it is a pivotal tool in reshaping MSME lending. It thus fills this gap between MSMEs and financial institutions by displaying transparency and reducing fraudulent activities, thereby accelerating loan approvals.
Access to formal credit and government benefits, open to MSMEs, provides a secure framework within which lenders can evaluate the borrowers. This helps bring about an all-win situation that promotes economic development as well as financial integration.
Faster MSME Lending Made Possible with Deepvue’s API
At Deepvue, our Udyam Verification API streamlines and enhances MSME lending by providing safe, fast, and reliable verification solutions. It is used to deal with some of the principal problems that have arisen in the process of lending.
1. Automatic Verification
Our API automates the entire Udyam verification, thus not involving any kind of manual check. It fetched and validated crucial details like Aadhaar, PAN, and GSTIN from genuine government sources and ensured accuracy while saving valuable time and resources.
2. Fraud Prevention
The risk related to fraudulent claims for MSME lending is high. Our API eliminates the possibility of fraudulent applications by enabling verified data to be received straight from official databases, hence giving lenders confidence to make their decisions.
3. Efficient Onboarding
Onboarding the MSMEs with inefficient processes can discourage them from applying for a loan. With our API, lenders onboard the business in real time and verify all their credentials, which makes loan approvals faster than weeks to hours.
4. Plug-and-Play Integration
We have designed it for simplicity and seamless integration into existing systems. Whether a bank, NBFC, or a fintech firm, our plug-and-play solution is hassle-free with minimal technical effort.
5. Real-Time Results
Our API gives the lender instant verifications, and thereby he can make a decision faster. MSMEs receive timely finance with this, which boosts customer satisfaction along with trust in the service.
FAQ:
What is Udyam Verification?
Udyam Verification is used to ascertain the MSME’s Udyam Registration to evidence its business existence to the government.
Why does Udyam Verification become essential for MSME lending?
Udyam Verification provides lenders with the credibility of MSMEs, thereby reducing loan approval time as well as risks.
How does Udyam Verification benefit MSMEs?
Udyam Verification makes access to credit easier and increases credibility, allowing MSMEs to access benefits through schemes of the Government.
What are the verified details through Udyam Verification?
Udyam Verification process verifies identity (Aadhaar, PAN), GSTIN, business classification, and financial parameters.
How Does Udyam Verification Reduce Frauds?
Udyam Verification contains government-verified data so that only valid businesses get registered with little fraudulent claims.
