A few days ago, I met an old colleague who now runs SME lending at an NBFC. Over tea, he vented about a customer they had to reject.
This business owner from Indore had been running a small manufacturing unit for nearly a decade. He employed 30 people, paid taxes regularly, and had a spotless repayment history. But there was one “crime”: his GST certificate said Shakti Engineering Works while his factory license carried Shakti Industries.
“Compliance flagged it as a mismatch,” my friend shrugged. “We couldn’t clear him.”
Here’s the kicker — the same person walked into another NBFC down the street and got approved in three days.
That’s when it struck me. The MSME growth story isn’t failing because of the entrepreneurs. It’s failing because the onboarding systems haven’t evolved to match their ground reality.
The Blind Spots in MSME KYB
Messy Paper Trails
Ask a corporate for documents and you’ll get uniform PDFs with perfectly matching names. Ask an MSME? You might get a bill in one name, a GST record in another, and a local license with a slightly different address format. None of it screams fraud — but to a rigid system, it does.
Think about it. Many MSMEs are family-run, sometimes operating for generations. Records were created in different years, by different local officers, often handwritten at first and later digitized. Expecting perfection is like expecting a hand-stitched kurta and a factory-made shirt to look identical. The intent is genuine, the differences are cosmetic.
Connectivity & Digital Gaps
Not every business owner has an official website or stable internet. Many operate entirely on WhatsApp and word of mouth. Try running a heavy video KYC or OTP-based flow here — it will collapse halfway through.
This isn’t about “lack of tech adoption.” These entrepreneurs are incredibly savvy — they know how to sell via WhatsApp groups, manage ledgers on their phones, and even take orders over Instagram reels. What they don’t have is infrastructure consistency. A bad network day or a government portal outage should not derail their loan application.
The Myth of Risk
For years, MSMEs have been tagged “risky.” Yet RBI data shows delinquency levels at a five-year low — barely 1.7%. That’s better than several corporate loan books. The businesses aren’t the issue. The tools we use to vet them are.
Risk perception often comes from distance. A head office compliance team, sitting hundreds of kilometers away, doesn’t see the reality of the shop floor, the customers queuing up, or the community trust these businesses carry. Local branch managers know, but that knowledge rarely makes it into the centralized KYB pipeline.
Why MSMEs Deserve Better
MSMEs are not just a “segment.” They are the economic lifeline of Bharat. A kirana store in Gorakhpur, a textile unit in Surat, a furniture workshop in Jodhpur — each of these creates jobs, drives consumption, and fuels local economies.
Yet, when they approach formal finance, they often feel penalized for not looking like corporates. Imagine being told that the loan you desperately need is stuck because one letter in your business name doesn’t match across documents. That isn’t risk management; it’s bureaucratic rigidity.
This gap has consequences. According to the IFC, India’s MSME credit gap is estimated at over $530 billion. Every document mismatch, every system timeout, widens that chasm. If we want inclusive growth, fixing MSME onboarding isn’t optional — it’s urgent.
How Gridlines Reimagines MSME Onboarding
The good news? The rails are already there. What’s missing is a smarter way to connect them.
- Vernacular Document Parsing
Upload a trade license, GST bill, or utility slip — Gridlines OCR APIs can read them with high accuracy. No more delays because “the system can’t process this language.” - Instant Udyam Checks
One API call verifies registration on the Udyam portal, pulling in details like classification, registration date, and activities. No chasing down certificates. - GST Network Intelligence
Want to know if a business has multiple locations or what products it sells? Our GST APIs map registrations and extract HSN codes, giving lenders a real snapshot of the business scale.
The Bigger Picture
Why does all this matter? Because access to finance is more than just paperwork. For an MSME, faster onboarding means:
- Expanding production without missing seasonal demand
- Paying suppliers on time, strengthening trust in local ecosystems
- Hiring a few extra workers, creating jobs where they matter most
- Transitioning from informal credit (friends, family, moneylenders) to formal credit at fairer rates
For financial institutions, the payoff is equally strong:
- Customer Growth: Enter untapped Tier 2 and Tier 3 markets at scale.
- Operational Efficiency: Reduce manual checks, cut costs, and shrink approval cycles.
- Risk Differentiation: Use richer, more contextual data to spot genuine risk rather than reject borderline mismatches.
- Competitive Advantage: MSMEs are loyal — if you solve onboarding once, they stay for years.
Looking Ahead
The future of MSME KYB will not be about stricter checks but about smarter checks. Think beyond documents: transaction flows, GST filings, supplier networks, even digital payment trails can become part of verification. The question isn’t whether MSMEs are trustworthy — the question is whether our systems can see their trustworthiness in the right data.
And this is where Gridlines is positioning itself — not just as a tool, but as an enabler of financial inclusion at scale.
Imagine an MSME in a town like Bhilai or Aligarh applying for a loan. The process should take hours, not weeks. The documents should be read regardless of language. The system should cross-check details across multiple government databases instantly. And the business owner should walk away feeling respected, not second-guessed.
That isn’t a distant dream. With API-driven KYB, it’s already happening.
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