Reserve Bank of India to launch pilot project for frictionless credit

Monday 21 August 2023 15:43 CET | News

The Reserve Bank of India (RBI) has announced the launch of a pilot project in the form of a Public Tech Platform to simplify access to credit.

The objective of the project is to provide digital information that facilitates credit or loans to lenders. Developed by the Reserve Bank Innovation Hub, the Public Tech Platform for frictionless credit represents an end-to-end digital platform, that has an open architecture, open Application Programming Interfaces (APIs), and standards to which all financial players can connect in a plug-and-play model.

According to officials, the initiative simplifies the integration of financial data through open APIs, improving operational efficiency. Processes can also be streamlined through the centralisation of potential borrowers’ information on a unified platform. Through the participation of banks, NBFCs, fintech companies, and startups, the collaborative strategy aligns with the objective of seamless credit and payment solutions. Moreover, the plug-and-play model promotes innovation, pushing the lending sector toward improved accessibility, decreased costs, and efficiency.

Now, as lenders require multiple sets of information for approving a credit or a loan, the data is collected from multiple entities, including the Central and State governments, account aggregators, banks, and credit bureaus. Due to the lack of timely delivery and easy access, the central bank has introduced the public tech platform, where lenders can procure digital information to facilitate credit. Representatives have also stated that the platform is merging pieces of digital data from across the ecosystem into a cohesive unit. Through the integration of banking, credit, corporate and governmental information, it offers credit accessibility to segments of the population that were previously underserved.

The Public Tech Platform’s capabilities

In the pilot program, the platform will initially focus on products such as Kisan Credit Card loans, dairy loans, MSME loans, personal loans, and home loans through participating banks. Moreover, the Public Tech Platform will allow linkage with services such as Aadhaar e-KYC, land records from onboarded State Governments, satellite data, PAN validation, transliteration, Aadhaar e-signing, account aggregation by Account Aggregators (AAs), as well as house or property search data.

At the beginning of August 2023, RBI showcased the recent initiatives related to the pilot on frictionless credit. Digital Kisan Credit Card (KCC) and Digital Dairy were exhibited at an experience centre, where KCC highlighted how digitised land record data can be utilised to sanction and disburse loans easily, enabling farmers to not visit physical bank branches, as the process was paperless and digitised completely. The digital journey of KCC also included account opening through e-KYC, and accessing digitised state government land records and credit bureau scores.

Moreover, India-based Axis Bank announced that it will provide KCC and unsecured MSME loans to small business customers on the Public Tech Platform. The bank’s officials stated that they will leverage the platform for frictionless credit for accessing data for customers in a secure and consented manner, including PAN validation, Aadhaar e-KYC, Account Aggregator data, verification of land records and penny drop service to validate bank accounts.

Taking into consideration the learnings during the pilot project, the Reserve Bank of India also intends to expand the scope and coverage and include more products, information, providers, and lenders during the initial programme.

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Keywords:	banking, online banking, online platform, digitalisation, financial institutions
Categories:	Banking & Fintech
Companies:	Reserve Bank of India
Countries:	India

This article is part of category

Banking & Fintech

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