RBI’s Public Tech Platform for Frictionless Credit

Incorporated on April 1, 1935, the Reserve Bank of India (RBI) is our country’s central bank. It performs several crucial functions to regulate and supervise India’s financial system. These functions of the RBI include maintaining synchronisation among the different financial institutions in India, which is essential for creating a secured financial system.

The RBI has announced a Pilot Project for a Public Tech Platform for Frictionless Credit. The Platform is being designed and developed by the Reserve Bank 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.”

Launched on August 17, 2023, the platform will mainly focus on Kisan Credit Card loans up to ₹1.6 lakh per borrower, Dairy Loans, MSME loans (without collateral), Personal loans and Home loans through participating banks. 

Simply said, it is similar to a Google search for retail lending. It combines data required for disbursement and sanction 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 Platform is intended to be rolled out as a pilot project in a calibrated fashion,

both in terms of access to information providers and use cases,” The RBI said. Keeping this in view, the features of the platform are as follows:

• Reduced Operational Costs:

It shall bring about efficiency in the lending process in terms of reduction of costs, quicker disbursement, and scalability. During the initial stage, the platform will mainly focus on Kisan Credit Card, Dairy Loans, MSME loans (without collateral), Personal loans and Home loans through participating banks.

• Frictionless and Timely Delivery of Rule-Based Lending:

With rapid progress in digitalisation, India has embraced the concept of digital public infrastructure, which encourages banks, NBFCs, FinTech companies and startups to create and provide innovative solutions in payments, credit, and other financial activities. The data from the central bank and different state banks will be collated in one place, which will help in the easy disbursement of loans. 

• Additional Services

The platform enables connection with services such as Aadhaar e-KYC, land records from onboarded State Governments (Madhya Pradesh, Tamil Nadu, Karnataka, Uttar Pradesh, and Maharashtra), Satellite data, PAN Validation, Transliteration, Aadhaar e-signing, account aggregation by Account Aggregators (AAs), etc. 

• Empowering Financial Institutions

The portal will empower banks, NBFCs, Fintech enterprises, and Startups to devise and deliver innovative solutions in payment, credit, and other financial domains. This aligns with the government’s vision to establish a digital public infrastructure.

Advantages of the Platform

The advantages of the Public Tech Platform for Frictionless Credit include the following:

1. The platform would enable the delivery of frictionless credit by acting as a bridge between borrowers and lenders to offer digital information.
2. It shall bring about efficiency in the lending process in terms of reduction of costs, quicker disbursement, and scalability.
3. With rapid progress in digitalisation, India has embraced the concept of digital public infrastructure, which encourages banks, NBFCs, FinTech companies and startups to create and provide innovative solutions in payments, credit, and other financial activities.
4. It will make credit more accessible to borrowers and make distributing the credits easier for lenders.

How Will 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, including their credit history, KYC, etc. This data is gathered from central and state governments, account aggregators, etc. The compilation of data takes a few days to weeks and even months to issue the loan. To make this process easier, the government introduced the Public Tech Platform, where lenders can access the information digitally.

“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,” said the RBI.

What is the Objective of RBI Behind This Platform?

A decade ago, the Bill Discounting took 2 days to settle for traders and corporates. The RBI, in 2014, introduced the Trade Receivables Discounting System (TReDs), which allowed the MSMEs to avail of discounting services around the clock, which eased their access to working capital. 

The Public Tech Platform will play a similar role in the field of lending. For a new customer, it takes 2-3 days to get a loan sanctioned from the Banks or NBFC. For home loans, it may take 2-3 weeks. To ease this and reduce the processing time, the platform will help in the efficient sanction of loans and lead to better operational efficiencies. 

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 help in reduced operational time and more borrowing and lending. In collaboration with the RBI, this is an excellent move by the government to digitise credit delivery.

Frequently Asked Questions

Source:

Source:https://rbidocs.rbi.org.in/rdocs/PressRelease/PDFs/PR750RBIPILOTPROJECTBAAA31635BD74A9E92A9F10C66B6B314.PDF