What is RBI's pilot project for facilitating frictionless credit?

The Reserve Bank Innovation Hub, a wholly-owned subsidiary of the central bank, has developed the end-to-end digital platform

In a move aimed at easing access to credit, the Reserve Bank of India (RBI) launched a pilot project in the form of a "Public Tech Platform for Frictionless Credit" on Thursday. The move seeks to give digital information to lenders to expedite access to credit or loans.

What is the 'Public Tech Platform for Frictionless Credit'?

It is an end-to-end digital platform that will have an open architecture, open Application Programming Interfaces (APIs), and standards to which all banks can connect in a "plug and play" model. The Reserve Bank Innovation Hub, a wholly-owned subsidiary of the central bank, has developed the platform.

What is frictionless credit?

Frictionless credit is a borrowing approach that seeks to streamline the lending process for consumers. 

Unlike the traditional credit systems, where individuals need to go through extensive paperwork, credit checks and lengthy approval procedures, frictionless credit promises a smoother and faster experience. 

RBI's project is designed to smoothen Kisan Credit Card lending by automating various processes within the banks and integrating their systems with service providers.

How will the public tech platform help disburse loans?

Before a credit or loan is approved, it often takes lenders several days, a week or even months to process several sets of information. Currently, data has to be sourced from credit information bureaus, account aggregators, and banks, which has led to obstacles in the timely delivery of lending. The public tech platform seeks to make this process seamless by providing all the required information in one place to facilitate credit.

Reduction of cost, time

RBI stated that the platform is meant to be rolled out as a pilot project in a measured way, both in terms of access to information providers and use cases. The platform will help to disburse loans quicker, the central bank added. During its pilot run, the public tech platform will emphasise products such as Kisan Credit Card loans of up to Rs 1.6 lakh per borrower, dairy Loans and MSME loans (without collateral).

Linkages with other services

The public tech platform will facilitate linkages with services such as Aadhaar e-KYC, PAN validation, Aadhaar e-signing, account aggregation and house/property search data, among other things.

On August 17, Axis Bank said that it would offer Kisan Credit Card (KCC) and unsecured MSME loans to small business customers on the public tech platform. As a pilot, Kisan Credit Cards will be offered in Madhya Pradesh and will be available to customers for up to Rs 1.6 lakh to begin with. MSME loans will be available across the country and loans up to Rs 10 lakh will be offered to customers, Axis Bank said.