RBI nudges fintechs to consider granting same-day loans to street hawkers

Loans are repaid within 24 hours and seek to bolster financial inclusion at the bottom of the pyramid

The Reserve Bank of India (RBI) has indicated to fintechs that they should weigh a “same-day” loan offering targeted at vendors and hawkers.

Such a loan is given out and repaid within 24 hours and seeks to bolster financial inclusion at the bottom of the pyramid. Sources said that the need for such a scheme had figured in talks with the central bank’s FinTech Department.

As on date, there is no tested model for same-day loans in the country. The pain points being the lack of credit histories among vendors and hawkers. While many of them in the metros, urban and semi urban areas do have bank records and traceable records, the larger audience suffers from less than adequate markers of visibility for lenders.

Fintech industry sources said that while the idea is laudable, enthusiasm for launching same-day loans is not high. A pilot-project may help understand the practical issues involved before it is rolled out commercially.

That said, there are learnings to be had from the PM Street Vendor's AtmaNirbhar Nidhi (PM SVANidhi) scheme, which is an initiative of the Ministry of Housing and Urban Affairs (MoHUA).

Launched on June 1, 2020, the micro-credit scheme for urban street vendors provided collateral-free working capital loans up to Rs 50,000. Under the scheme, regular repayments were incentivised with a 7 per cent interest subsidy and digital transactions rewarded with cashbacks up to Rs 1,200 annually. The scheme employed Aadhaar-based e-KYC and rode an end-to-end IT platform, and SMS-based notifications for application status updates. According to MoHUA, the scheme supported more than 5 million street vendors, and was instrumental in bringing them into the formal economic fold, presenting fresh avenues for upward mobility.

From July 1, 2023, a campaign was launched by MoHUA revising the targets to be achieved under the scheme. This led to the disbursement of 6.575 million loans, benefiting more than 5 million street vendors, with a total value exceeding Rs 8,600 crore. State-run banks played a pivotal role through their support of the first-ever micro-credit scheme designed for urban poor.

There is chatter that perhaps a data-base of those at the lower of the pyramid could be thought of based on the experience from PM SVANidhi pulled in from lenders. And mate this with the move to upgrade credit information companies (CICs) data which is sought to be updated on a fortnightly basis (15th and last day of the month).

Uncharted waters 
 

 Same-day loans are disbursed and repaid within 24 hours

 Need for such a scheme had figured in talks with the central bank’s FinTech Department

 As on date, there is no tested model for same-day loans

 There is a lack of credit histories among vendors and hawkers

 There are learnings to be had from PM SVANidhi scheme