RBI Initiates Pilot Project for Seamless Credit Access Through Public Technology Platform

The Reserve Bank of India (RBI) has formally declared its intention to launch a pilot project for a Public Technology Platform for Frictionless Credit, with the commencement date set for August 17, 2023. This groundbreaking platform is currently under development by the Reserve Bank Innovation Hub (RBIH), a fully-owned subsidiary of the RBI.

The primary objective of the Reserve Bank of India’s (RBI) forthcoming pilot project for a Public Technology Platform for Frictionless Credit, facilitated by the Reserve Bank Innovation Hub (RBIH), is to enhance the efficiency of the lending process. This ambitious endeavor is underpinned by a multifaceted approach that seeks to achieve cost reduction, expedite disbursement timelines, and facilitate scalability within the credit ecosystem.

What is the Public Tech Platform?

The Public Technology Platform, as envisioned by the Reserve Bank of India (RBI), represents a revolutionary digital infrastructure designed to facilitate an uninterrupted and streamlined flow of digital information to lending institutions. The overarching goal of this platform is to facilitate frictionless access to credit, wherein credit applicants and lenders can interact seamlessly within a technologically integrated ecosystem.

The essence of this innovative endeavor lies in its end-to-end digital nature. The platform functions as a comprehensive and interconnected system, meticulously designed to encompass the entire spectrum of the credit application process. It serves as a conduit through which information can be exchanged seamlessly among various financial stakeholders, thereby fostering a dynamic and efficient credit ecosystem.

An inherent feature of the Public Technology Platform is its ‘plug and play’ model. This model ensures that the integration of financial players, ranging from borrowers to lenders, occurs seamlessly and effortlessly. By adopting this approach, the platform eliminates traditional barriers and complexities associated with credit applications. This plug and play mechanism expedites the sharing of crucial information, expounding the overall efficiency of the credit evaluation and approval process.

Purpose of Public Tech Platform

The primary purpose of the Reserve Bank of India’s (RBI) initiative to establish a Public Technology Platform for Frictionless Credit is to address the existing gaps and challenges within India’s credit ecosystem through the creation of a robust and inclusive digital infrastructure. This forward-looking endeavor is strategically designed to seamlessly integrate disparate stakeholders, thereby fostering a cohesive and efficient environment for digital credit delivery.

Currently, India lacks a comprehensive and all-encompassing digital public infrastructure that can effectively bring together various entities involved in credit assessment and delivery. The absence of a unified platform has resulted in fragmented data distribution, wherein essential credit-related information is dispersed across multiple systems maintained by various entities. These entities encompass Central and State governments, account aggregators, banks, credit information companies, digital identity authorities, and more.

This fragmented data landscape poses significant hurdles in the seamless and timely delivery of credit. The data required for comprehensive credit appraisal are often dispersed among different entities, leading to inefficiencies, delays, and complexities in the lending process. Consequently, rule-based lending, which relies on accurate and timely data analysis, faces hindrances due to this disjointed data structure.

The purpose of the Public Technology Platform is to bridge these gaps and streamline the credit delivery process. By creating a centralized digital ecosystem, the platform aims to interconnect these diverse entities and facilitate the smooth exchange of credit-related data. This interconnectedness enables lenders to access accurate and up-to-date information promptly, leading to more informed and efficient credit evaluations.

India has embraced the concept of digital public infrastructure as a means to foster innovation, promote financial inclusion, and expedite the progress of digitization within the financial sector. This embrace is reflected in a concerted effort to create an enabling environment for banks, Non-Banking Financial Companies (NBFCs), FinTech companies, and startups to develop and deliver innovative solutions across various financial activities, including payments, credit, and more. This approach has yielded rapid advancements in digitalization within India’s financial landscape.

When will the Pilot Project Start?

The pilot project for the Public Technology Platform for Frictionless Credit is scheduled to commence on August 17. The rollout will be conducted in a carefully calibrated manner to ensure a smooth and effective implementation.

Initially, the project’s focus will encompass several specific financial products, namely:

1. Kisan Credit Card Loans Up to Rs 1.6 Lakh per Borrower
2. Daily Loans
3. MSME (Micro, Small, and Medium Enterprises) Loans
4. Personal Loans
5. Home Loans

These products will be made available through participating banks as part of the pilot project.

The platform’s capabilities will extend beyond mere credit facilitation, integrating a range of services and data sources to optimize the credit assessment process. These services include:

1. Aadhaar e-KYC: Utilizing Aadhaar-based electronic Know Your Customer for identity verification.
2. Land Records: Accessing land records from onboarded State Governments (Madhya Pradesh, Tamil Nadu, Karnataka, Uttar Pradesh, and Maharashtra).
3. Satellite Data: Incorporating satellite data for comprehensive insights.
4. PAN Validation: Verifying Permanent Account Number details for accurate identification.
5. Transliteration: Enabling transliteration services for data standardization.
6. Aadhaar e-signing: Leveraging Aadhaar-based electronic signing for documentation.
7. Account Aggregation: Employing account aggregation services by Account Aggregators (AAs).
8. Milk Pouring Data: Incorporating data from select dairy cooperatives.
9. House/Property Search Data: Integrating data relevant to housing and property searches.

The pilot project’s initial scope will serve as a learning phase, during which insights and feedback will be garnered to refine and enhance the platform’s functionality. Based on these learnings, the project’s coverage and offerings will be expanded to include additional financial products, information providers, and lenders.

This phased approach underscores the RBI’s commitment to an iterative and progressive implementation, fostering a platform that is robust, effective, and responsive to the needs of stakeholders within India’s credit ecosystem.