16.5 Customer and supplier verification

A borrower’s customer and supplier relationships are central to their business reality. Verifying these — beyond what GST and bank statements show — strengthens the underwriting and surfaces fraud.

Why customer / supplier verification matters

• Confirms business reality — a borrower with verified named customers and suppliers is a real business with verifiable counter-parties.
• Detects fictitious or related-party transactions — fake customers used to inflate turnover; related parties used to round-trip cash.
• Surfaces concentration risk — top customer / top supplier dependence.
• Validates the trade pattern — credit terms with customers and suppliers consistent with claimed cycle.
• Provides recovery anchors — known customers can be a recovery vector (notification factoring / direct collection in distress).

Verification approaches by data source

A. GST data verification

The richest single source for B2B borrowers.

GSTR-1 outward supplies (verifies customers)

• Pull last 24 months.
• Aggregate by buyer GSTIN.
• Top buyers identified.
• For each top buyer:
  • Verify buyer’s GSTIN active.
  • Verify buyer’s business is genuine (MCA lookup, GST profile lookup).
  • Cross-check with borrower’s claimed top-customer list.

GSTR-2A / 2B inward supplies (verifies suppliers)

• Aggregate by supplier GSTIN.
• Top suppliers identified.
• For each top supplier:
  • Verify supplier’s GSTIN active.
  • Verify supplier’s business (MCA, profile).
  • Cross-check with borrower’s claimed top-supplier list.

Discrepancy patterns

• Claimed customer / supplier not in GST data → either an unregistered counter-party (small / cash-business) or a fictitious claim. Investigate.
• GST data shows large counter-party not claimed by borrower → borrower omitted; may indicate a major commercial relationship not disclosed.
• GST sales to related parties (counter-party shares directors / addresses / contact) → flag for related-party concentration.

B. Bank-statement counter-party analysis

Bank-credit-side counter-parties are the customers paying borrower; bank-debit-side counter-parties are suppliers borrower pays.

• BSA tools categorise transactions by counter-party.
• Top inbound counter-parties = top customers.
• Top outbound counter-parties = top suppliers.

Cross-check with GST

• Customer share of revenue by name should align across GST and bank.
• Material divergence → REFER for explanation.

C. E-invoice / IRN verification

For B2B invoices above the e-invoice threshold (currently ₹5 Cr aggregate turnover; threshold reduces periodically):

• Each invoice must be registered on GST IRP; IRN issued.
• Lender can verify any specific IRN’s authenticity in real time.

For invoice-backed lending products, IRN verification is a hard requirement.

D. Direct reference checks

For named customers / suppliers (typically 3 + 3 for thin-file; optional for standard-grade):

• Borrower provides contact details with consent.
• Lender calls / visits per 6.16 References and field validation.

E. Anchor confirmation

For distributors / dealers of large corporates:

• Anchor’s commercial team confirms relationship + volume + status.
• Anchor portal access (if integrated).

See 6.18 Anchor-backed thin-file.

F. Tally / accounting data

If borrower’s accounting captures customer / supplier ledgers:

• Tally / Zoho extracted ledgers verify ageing pattern.
• Top debtors / creditors list.
• Cross-check with GST and bank.

G. Marketplace settlement data

For e-commerce sellers, marketplace data identifies platform-mediated customer flow.

Verification depth by borrower profile

Borrower profile	Verification depth
Large standard-grade with strong GST + bureau	Light; GST + bank counter-party analysis sufficient
Mid-standard	Medium; spot-check top 3 customers + 3 suppliers via GST profile lookups
Thin-file	Heavy; named reference calls + GST verification + field FI
Invoice-backed product	Per-invoice IRN verification + buyer verification
Anchor-backed	Anchor confirmation primary; other counter-parties less critical
SCF programme borrower	Anchor portal data + relationship dynamics primary

What you’re looking for

Positive signals

• Verified buyers / suppliers — real businesses, GST-active, addressable.
• Stable trade pattern over 12 – 24 months — repeat counter-parties suggest stable business.
• Diverse counter-party base — many distinct buyers / suppliers (no over-concentration).
• Trade-credit terms within industry norm — borrower’s terms with counter-parties consistent with claimed cycle.
• Cross-source consistency — GST + bank + Tally all agree.

Negative signals

• Fictitious counter-parties — claimed but not in GST data and not reachable.
• Related-party concentration — top buyer / supplier turns out to be related to borrower (same directors / addresses).
• Circular GST flow — borrower’s purchases from a supplier match suspiciously closely with that same supplier’s purchases from borrower (round-tripping).
• Sudden counter-party churn — large customers / suppliers disappeared recently.
• GSTR-2A vs Tally divergence — borrower claims certain suppliers in Tally but they don’t appear in GSTR-2A.
• Anchor disputes — anchor confirms relationship but with concerns / pending disputes.

Fraud patterns to watch

A. Fictitious buyer (turnover inflation)

Borrower’s GSTR-1 includes invoices to “buyers” who don’t really exist or didn’t actually purchase. Detection:

• Lookup buyer GSTIN — if cancelled / non-existent / shell-pattern, flag.
• Check buyer’s GSTR-3B — buyer should have claimed the corresponding ITC; if not, invoice is fake.

B. Circular trade / round-tripping

Borrower and a related entity issue invoices to each other to inflate turnover both ways. Detection:

• Counter-party concentration analysis.
• Common directors / addresses / mobiles.
• Symmetric trade pattern (A bought ₹X from B and sold ₹X to B — same period).

C. Anchor letter forgery

Discussed in 6.18 Anchor-backed thin-file — verify any anchor letter directly.

D. Supplier kickback inflation

Borrower’s suppliers inflate invoices; cash backs to borrower or related party. Hard to detect; pattern of unusually high supplier purchases relative to industry norm is a flag.

E. Invoice cycling (specific to invoice financing)

Same invoice presented to multiple lenders for financing. Detection:

• IRN cross-check (if IRN-based, each IRN is unique).
• Internal duplicate-invoice detection.
• Industry-shared fraud feeds (rare but growing).

F. Customer paying to wrong account

Settlement of customer payments not coming into borrower’s claimed business account but to a related personal account. Detection:

• Bank-statement counter-party analysis shows mismatch.
• Tally accounting captures customer payments going elsewhere.

What the platform must build

• GSTR-1 / 2A counter-party aggregator in the data ingestion module.
• Counter-party verification service that does GSTIN status + MCA lookup + profile checks.
• Related-party detection — graph analysis across GST counter-parties + MCA director shared-list + address / mobile linkages.
• Top-customer / top-supplier dashboards in case view.
• Invoice IRN verification for invoice-backed products.
• Anchor portal connectors where formalised.

Operational rhythm

• At application: full counter-party analysis.
• At renewal: refresh; check for material changes.
• At EWS: counter-party churn / concentration shift is an EWS signal that triggers re-verification.

Compliance touchpoints

• DPDP — counter-party data is third-party data; consent + purpose + retention.
• GST law — using GST data for purposes other than tax requires borrower consent (already covered by AA-equivalent consent at data pull).
• Outsourcing MD — vendor lookup tools governed.

Related

• 3.D Data ingestion — GST / BSA / e-invoice integration.
• 4.5 GST data and GSPs.
• 6.18 Anchor-backed thin-file.
• 6.16 References and field validation.