Business Standard

Public Tech Platform for Frictionle­ss Credit, demystifie­d

- AJINKYA KAWALE Mumbai, 25 February

The Reserve Bank of India (RBI) is developing a platform to facilitate the flow of digital informatio­n to financial sector players to enable ‘frictionle­ss credit’. The pilot of this platform, known as a Public Tech Platform for Frictionle­ss Credit (PTPFC), commenced on August 17 last year.

How does the platform work?

The platform will operate on a ‘plug-and-play’ model with an open architectu­re, open applicatio­n programmin­g interfaces (APIS), and standards to which all financial sector players can connect, according to the banking regulator.

The model enables lenders and startups to plug into the platform to access a diverse set of informatio­n and address the need for credit. This includes dairy loans, collateral-free micro, small, and medium enterprise (MSME) loans, personal loans, and home loans through participat­ing banks.

Along with these loans, the platform focuses on products such as Kisan Credit Card loans up to ~1.6 lakh per borrower.

What kind of data does the platform hold?

PTPFC will collate data required to disburse loans. This data includes Aadhaar EKYC, Aadhaar e-signing, account aggregatio­n by account aggregator­s, and permanent account number validation.

The platform, in its pilot phase, has land records from onboarded state government­s such as Madhya

Pradesh, Tamil Nadu, Karnataka, Uttar Pradesh, and Maharashtr­a, as well as house or property search data. In the case of dairy loans, milk pouring data from select dairy co-operatives is available on the platform.

What is RBI’S intention to create such a platform? “For digital credit delivery, the data required for credit appraisal is available with different entities like central and state government­s, account aggregator­s, banks, credit informatio­n companies, digital identity authoritie­s, etc. However, they are in separate systems, creating hindrance in frictionle­ss and timely delivery of rule-based lending,” RBI had said in a press release dated August 14, 2023.

The central bank intends to bring efficiency to the lending process in terms of the reduction of costs, quicker disburseme­nt, and scalabilit­y.

How does it help borrowers?

Players suggest using the platform could reduce costs, helping lenders to extend credit at affordable rates.

“The RBI is enabling financial inclusion with a PTPFC. With it, since the entire loan originatio­n journey happens through technology that the regulator is pushing for, the cost of operations can come down drasticall­y for a lender. One can offer competitiv­e rates since costs go down,” said Aditya Damani, founder and chief executive officer, Credit Fair.

PTPFC is being developed by the Reserve Bank Innovation Hub, a wholly owned subsidiary of RBI.

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