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Public Tech Platform for Frictionless Credit


The Reserve Bank of India (RBI) has initiated a pilot programme aimed at evaluating the feasibility of a ‘Public Tech Platform for Frictionless Credit’, seeking to facilitate seamless and efficient credit delivery by lenders for Credit Appraisal, and therefore boosting Financial Inclusion in India.


GS III: Indian Economy

Dimensions of the Article:

  1. Public Tech Platform for Frictionless Credit
  2. Benefits and Outcomes of the Public Tech Platform for Frictionless Credit

Public Tech Platform for Frictionless Credit

The Reserve Bank Innovation Hub (RBIH) has developed a digital platform for seamless credit access, aiming to simplify the credit process and enhance efficiency.

Key Features:
  • End-to-End Digital Platform: The platform provides an end-to-end digital solution for credit access, integrating various services and data sources.
  • Open Architecture and APIs: The platform is built with an open architecture, open Application Programming Interfaces (APIs), and standards, allowing all banks to connect easily.
  • Plug and Play Model: Banks can connect to the platform using a “Plug and Play” model, facilitating quick integration.
  • Consolidation of Data: The platform integrates data from central and state governments, Account Aggregators (AA), banks, credit information companies, and digital identity authorities.
  • Streamlined Lending Processes: By consolidating data, the platform aims to eliminate obstacles and streamline rule-based lending processes.
Credit Appraisal Process:
  • The platform encompasses the credit appraisal process, which evaluates a borrower’s ability to repay the loan and adhere to credit terms.
  • The process is built on three pillars: adverse selection, exposure risk measurement, and default risk assessment.
Diverse Loan Types:
  • The platform covers various loan types, extending beyond Kisan Credit Cards (KCC) to include dairy loans, collateral-free MSME loans, personal loans, and home loans.
Data Integration:
  • The platform integrates with various services such as Aadhar e-KYC, Aadhar e-signing, land records, satellite data, PAN validation, transliteration, and account aggregation by Account Aggregators (AAs).

Benefits and Outcomes of the Public Tech Platform for Frictionless Credit

Improved Credit Risk Assessment:

  • The consolidation of data allows for better credit risk assessment by providing a comprehensive view of the borrower’s financial profile.
  • Lenders can make more informed decisions, reducing the risk of defaults and improving the overall quality of the credit portfolio.

Efficient Credit Portfolio Management:

  • The platform enables lenders to manage their credit portfolios more efficiently by accessing real-time data and insights.
  • Lenders can monitor the performance of existing loans and make necessary adjustments based on changing circumstances.

Access to Accurate Information:

  • Borrowers benefit from improved access to accurate information that supports transparent and swift credit assessments.
  • Accurate data minimizes discrepancies and ensures fair lending practices, resulting in improved credit availability.

Lower Cost of Capital Access:

  • The expansion of credit availability due to accurate information and streamlined processes can lower the cost of borrowing for borrowers.
  • Reduced interest rates can make credit more affordable, especially for small businesses and individuals.

Reduction of Operational Challenges:

  • The platform addresses operational challenges associated with multiple visits and extensive documentation requirements.
  • This reduction in administrative burdens leads to cost savings for both lenders and borrowers.

Faster Loan Processing and Disbursement:

  • The platform’s streamlined processes lead to quicker loan processing and disbursement.
  • Borrowers can receive funds in a shorter timeframe, enabling them to meet their financial needs promptly.

Scalability and Efficiency:

  • The platform’s efficiency and digitized processes facilitate scalability, allowing lenders to handle a higher volume of credit applications.
  • This scalability contributes to a more efficient and responsive credit ecosystem.

Enhanced Credit Ecosystem:

  • The platform’s outcomes contribute to an enhanced credit ecosystem that benefits both lenders and borrowers.
  • It fosters trust and transparency in lending practices, promoting financial inclusion and economic growth.

-Source: The Hindu

April 2024