Public Tech Platform for Frictionless Credit, demystified
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.