Digital payments revolution to transform credit disbursal

The digital payments revolution is likely to trigger a sea change in the way credit is disbursed in India.

“Data from the GST (goods and services tax) Network, eNAM and direct benefits transfer will provide a wealth of information for data analytics,” said Amitabh Kant, chief executive officer of NITI Aayog. “This information can be used by institutions to help drive credit (to the poor), which will help uplift them from poverty.”

Speaking at the Inclusive Finance India Summit-2017 on Monday, Kant said: “In value terms, we have seen huge growth in digital transactions. A lot of innovation is taking place.” Others in the session titled “Changing contours of the financial sector architecture”, concurred with Kant’s assessment.

Rajiv Lall, chairman and managing director of IDFC Bank, said: “Currently, credit is skewed towards large corporates. But data is the new currency. It will usher in a change in the credit underwriting culture in India. Partnering with MFIs (microfinance institutions) will also help lower costs for delivering financial services.”

H R Khan, former deputy governor, Reserve Bank of India, said: “Once small and medium enterprises are formalised, then credit can flow. We also need to provide institutional credit for small and medium farmers who currently rely mostly on informal source of finance.”

The pace at which this transformation can take place is breathtaking. “In a short span, countries like Tanzania and Ghana have managed to leapfrog in terms of digital payments,” said Michael Wiegand, director of the Financial Services for the Poor program at the Bill & Melinda Gates Foundation.