According to a recent RBI Financial Stability Report, the gross non-performing asset ratio of banks may increase to 9.9 percent by September 2020 from 9.3 percent in September 2019. This is not a good sign as banks are the custodians of people’s money and need to follow astute practices in the choice of the investments and loans given.
While banks do their due diligence for any company before giving it a loan, such due diligence is based on traditional parameters such as performance of the company in the past three years or five years, cash flow statements, a profile of the management team and other things.
With the advent of GST since July 2017, there is another data type that has emerged as an indicator of company health and that is the behavior of a company filing its GST returns every month. This data is available every month and promises to give a wealth of information about the company.
Cygnet being a GSP has access to the public records of all companies filing the GST returns. Based on this data, which is available through the Govt API, Cygnet has built a score called the GST Returns Compliance Score or GRC Score.
Business Standard: Banks’ gross NPA ratios may rise from 9.3% to 9.9% by Sept 2020: RBI
How Can GRC Score Help Banks?
Cygnet’s GRC Score tool calculates the score based on the time of filing GST returns (GSTR-3B) for a regular taxpayer, in the last 12 months. This tool builds score based on the delays in filing GST returns, on the GSTR3B filing. These scores will be calculated based on publicly available data. To calculate the score, only the GSTIN number is required.
How does it work?
It is very simple. You just need to follow the 3 steps below after you visit our website, GST Returns Compliance Score.
Step 1 – Create an Account
Step 2 – Enter your GSTN
Step 3 – Generate your GRC Score
Explanation of GRC Score
The score is scaled from 0-100. Where 100/100 means the taxpayer has filed all returns on time over the last 12 months. But if the sore is 0/100 it clearly states that no returns were filed over the last 12 months. The score includes the delay in filing returns where more weightage is in the recent few months.
Calculations are very simple and easy to understand. The score is calculated as on the date, which means if you calculate the score today then your score will be based on the returns filed till date. If you have not filed a return, the delay is equivalent to the number of days between.
How the GRC Score benefits you?
Other than giving you a score GRC Score comes with a lot more benefits.
Assess Your Customers
The GRC Score will help you in assessing your loan customers. Before giving a loan and apart from analyzing other financial data, you can check the GRC score of these companies. If they are filing GST returns on time, that means they are GST compliant while if their GRC score is less, you might want to flag that. Further, even after giving a loan, you can monitor the company performance through a regular monthly check on their GRC score. This will help you as a bank to get alerted about potential NPAs in advance.
Assess Your Vendors
The GRC Score helps you to assess your vendor’s GST returns compliance. You will know which vendor to do business with.
This score also gives you an opportunity for assessing your own GST return compliance. If you want others to see you in a positive way, then you must have a high score. This will help you assess and improve your score.
100% Authentic Data
The score is calculated based on 100% authentic data from the government. What returns you file on GSTN it fetches the details and gives you the exact score based on filing pattern.
How will GRC Score Benefit the Credit Risk Management Process of the Banks?
Reduce the number of NPAs
It will act as a compliance indicator at each stage of the loan lifecycle and reduce the number of NPAs. A low GRC Score gives a clear indication that there is a probability of financial default in the future.
- Banks can flag companies with a low GRC score and put them under a close watch.
- Liquidity crisis is indicated by the late payment of taxes.
- Late payment of taxes leads to the late filing of GSTR3B.
- Late GSTR3B filing will lower the company’s GRC score with a greater weightage towards delays in recent months.
Therefore, it gets easy for companies to see upcoming defaulters when companies have a low GRC Score.
Increase Operational Efficiency
GRC Score will help to increase the operational efficiency throughout the credit risk management process. Having easy access to the GRC Score will help in reducing the operational hours spent on monitoring the credit risk. It improves operational efficiency by being accessible over APIs & easy to integrate into the current systems. GRC Score also reduces the loan processing time by being accessible in real-time, updated on the most recent data & is completely automated.
Therefore, the integration of the GRC Score enables banks to speed the disbursement and reduce their efforts on credit assessment & loan evaluation.
Why Choose Cygnet GSP for GRC Score?
Cygnet GSP is one of the trusted and well-known Fintech firms in India. We have varied tax technology solutions based on the need of the business. In addition to GRC Score, Cygnet also offers a complete report known as the Cygnet B360 Report, which provides the clients with business intelligence reports based on the consent of the company. This tool dives deep into the company’s financials with the help of their multi-dimensional analysis of the IT returns, GST returns, and the banking statement. Obviously, all this is done with the consent of the client where they allow us to access their documents and give them an extensive report with charts, summaries, and business insights.
Reports Generated through B360 Tool
- Business Sales Summary
- Previous Year Vs Current Year Sales Trend
- Yearly Purchase Summary
- Round Tripping Transactions at GSTIN & PAN level
- GST Tax Rate Wise Sales Bifurcation
- State Wise Sales Bifurcation
- Top 10 customer and vendors
These reports benefit the Banks, NBFCs for loan assessment, to make new credit products. It can also be used by corporates to assess the vendors and take decisions based on the rating given to the vendor. Want to avoid any kind of defaulting and loss in your business then check the GRC Score of your vendors now. To understand and see how these reports and the GRC Score will be beneficial to you and your business you can get in touch with our experts on email@example.com or read more about GRC Score.