Public Tech Platform for Frictionless Credit

Public Tech Platform for Frictionless Credit

News: The Reserve Bank of India (RBI) has embarked a comprehensive program focused on evaluating the feasibility of a ‘Public Tech Platform for Frictionless Credit.’

What is Public Tech Platform for Frictionless Credit?
• The initiative seeks to streamline and enhance credit delivery by financial institutions, ultimately contributing to greater financial inclusion in India.
• The primary goal of this public tech platform is to simplify the credit appraisal process, making it more accessible and efficient for both lenders and borrowers.
• It is developed under the aegis of the Reserve Bank Innovation Hub (RBIH), the platform is set to become an end-to-end digital solution with an open architecture, open application programming interfaces (APIs), and standardized protocols that all banks can seamlessly connect to in a “Plug and Play” model.

What is the significance?
• As all information will be available at one place, this initiative aims to eliminate friction in the credit access journey for MSMEs.
• The RBI’s commitment to facilitating financial inclusion aligns with the broader goals of the Indian government and the central bank to support the growth and development of MSMEs, which are crucial drivers of the country’s economic prosperity.

Advantages of the platform:
• Simplification and Scalability - It ensures that credit or other financial instruments are extended to a larger set of borrowers with good credit history.
• The borrowers would benefit by the lower cost of accessing capital, which would translate into productive investment spending.
• The platform reduces the multiple visits to bank to avail formal credit and costs associated with it. A recent RBI survey indicated that processing of farm loans took 2 to 4 weeks and costs about 6% of the loan’s total value.
• The participation of banks, NBFCs, fintech firms, and start-ups in this platform aligns with the dedication to seamless credit and payment solutions.