The RBI announced a Pilot Project for a Public Tech Platform for Frictionless Credit. The platform is designed and developed by the Reserve bank of India Innovation Hub (RBIH), a wholly- owned subsidiary of RBI, whose goal is to promote and facilitate innovation across the Indian financial sector.
What is The Public Tech Platform for Frictionless Credit?
The Public Tech Platform for Frictionless Credit is a database that provides a seamless flow of information to lenders. It is an end-to-end digital platform with an open architecture, open Application Programming Interfaces (APIs) and standards, to which all financial sector players are able to connect seamlessly in a “plug and play model.” The Public Tech Platform seeks to simplify this process by providing all the required information in one place to facilitate credit.
In Simple Words, it is similar to Google search for retail lending. It combines data required for disbursement and sanctions of loans, including Aadhaar e-KYC, Aadhaar e-signing, account aggregation by Account Aggregators (AAs) and PAN validation, which is essential for KYC.
Features of The Public Tech Platform for Frictionless Credit
The Features of the Platform are as follows:
- Minimal Operational Costs: It is intended to bring about efficiency in the lending process as it reduces costs, quick disbursement and scalability. Initially, the platform will mainly focus on Kisan Credit Card, Dairy Loans, MSME Loans, Personal loans and Home Loans through participating banks.
- Frictionless and on time delivery of Rule based lending: The concept of digital public infrastructure, which has seen a rapid growth, encourages banks, NBFCs, FinTech Companies, and startups to create and provide innovative solutions in payments, credit and other financial activities. The data between the central and different state banks is collated in one place, which helps in the disbursement of loans.
- Additional Banks: The platform enables for services such as Aadhaar e-KYC, land records from onboarded State Governments (Madhya Pradesh, Uttar Pradesh, Tamil Nadu, Karnataka and Maharashtra), Satellite data, PAN validation, Transliteration, Aadhaar e-signing, account aggregation by Account Aggregators, etc.
- Empowering Financial Institutions: The portal will empower banks, NBFCs, Fintech companies, financial market players and Startups to simplify and deliver innovative solutions in payment, credit and other financial domains.
- Gives access to a Larger Pool of Lenders: The platform helps in partnerships with a wide range of financial institutions, providing applicants with access to a broader selection of credit products. It also allows borrowers to compare and choose the best terms suited to their needs.
- Enhanced Matching: Usage of algorithms, to match borrowers with lenders based on their credit profiles, which increase the likelihood of approval and potentially secure better terms.
Therefore, lenders and borrowers should visit online financial marketplaces like OneNDF which will help in streamlining the loan application process and improving access to credit.
How does the Public Tech Platform help in the easy Disbursement of Loans?
While lending credit or a loan, the lender needs to compile a lot of information about the borrower which includes their credit history, KYC, etc. This data is gathered from central and state governments, account aggregators, etc. The process of compilation data takes a few days to weeks and sometimes even months to issue the loan.
This becomes a very lethargic and time-consuming process. To make this process easier, the government introduced the Public Tech Platform, where information has been digitised now and lenders can easily access the information digitally.
Regarding this the RBI said, “The Public Tech Platform would enable the delivery of frictionless credit by facilitating seamless flow of required digital information to lenders. The end-to-end digital platform will have an open architecture, open Application Programming Interfaces (APIs) and standards, to which all financial sector players can connect seamlessly in a ‘plug and play’ model,”
RBI’s objective behind this platform
A decade ago, the Bill Discounting took 2 days to settle for Traders and Corporates. In 2014, The RBI introduced the Trade Receivables Discounting System (TReDs), which allowed the MSMEs to avail discounting of services around the clock, which eased their access to working capital.
Similar to that, The Public Tech Platform will do the same in the field of lending. For a new customer, it takes 2-3 days to get a loan sanctioned from the banks or NBFC. Like, for home loans it may take 2-3 weeks and to ease this and reduce the processing time, the platform will help in the efficient sanction of loans and lead to better operational efficiencies.
Challenges in the Implementation of the Public Tech Platform
Some of the challenges that may come up in the implementation of the Public Tech Platform:
- Not everyone may have Aadhaar or PAN.
- Property related documents may not be available, especially in Tier-3 and below cities and slums.
- Compiling relevant data could also pose a challenge.
Conclusion
The Public Tech Platform for Frictionless Credit will gather and collate the data from various agencies and make it accessible to the lenders operating through the platform in the form and manner required for them to take credit calls.
This will be beneficial in reducing operational time and encourages more lending and borrowing. In collaboration with the RBI, this is an excellent move by the government to digitise credit delivery.
Moreover, Lenders and Borrowers should visit online Financial Marketplaces like OneNDF which helps in streamlining the loan application process, matching right lender-borrower and improving access to credit.
Source: Reserve Bank of India to Launch the Pilot Project for Public Tech Platform for Frictionless Credit
