GST data aids lenders’ decision on SME loans

E-way bills are now mandatory for the transport of goods within and across states, and e-invoices show business-to-business transactions to the government on a real-time basis. Data from these are now forming the basis for financial institutions to ascertain a corporate borrower’s cash flow position and identify credit worthiness, GST Suvidha Providers and private agencies authorized to generate these invoices and documents through software linked to official portals said.

According to them, e-invoicing and e-way bills will have a huge impact on credit distribution in the country and are beginning to lay the foundation of algorithmic credit disbursal.

Ram Iyer, founder and CEO of Vayana Network, a GST Suvidha Provider and financial adviser, said e-invoicing shows the promise of having a substantial collateral effect on the lending side.

Iyer said Vayana Network processes nearly three million requests daily for GST-related services such as GST returns, e-invoices and e-way bills from enterprises through its software interface with the official portals. “We are also a major player in supply chain financing. We do nearly a billion dollars per month of financing on our platform, and e-invoicing helps establish the credibility of the debtor and gives an extra level of comfort to the lender,” he said.

Iyer believes many lending institutions and account aggregators will use this data to back lending decisions. That is because an e-invoice shows a genuine business transaction between parties, and the invoice number assigned to a transaction is unique across the country, making it of great use to lenders.

According to Archit Gupta, founder and chief executive officer of fintech firm Clear, creating a database relating to economic activity by the GST ecosystem is a game changer. “GST has helped create the digital infrastructure that supports small businesses in seeking credit easily. From October, e-invoicing is required for businesses with sales of more than ₹10 crore in a previous year. Also, the sales data of a vendor, captured in the sales return, populates the purchase returns of his large corporate clients, based on which the latter claims tax credit. All these records of economic activity are extremely useful for businesses to seek credit and for lenders to make decisions,” Gupta said.

To be sure, GST Suvidha Providers do not have access to data submitted by businesses to the authorities through these service providers’ platforms.

Iyer of Vayana Network said any correction relating to an e-invoice is settled within 24 hours, and if one has an e-invoice which is past 24 hours, as of today, it is a confirmed e-invoice. “These are important factors in making lending decisions. The cost of underwriting will also come down as all information is available electronically. GSTIN (the registration number) is only given to entities which meet stringent KYC norms,” said Iyer.

“When we look at all these, we are on the cusp of something incredible that can happen. Banks, for instance, can now figure out algorithmically whether credit should be given. Public digital infrastructure is aiding in tackling the issue of access to credit,“ Iyer said.