NBFCs may soon join technology credit wave on UPI-like innovation

RBI likely to allow access to both legacy, fintech NBFCs

The Reserve Bank of India (RBI) may grant non-banking financial companies (NBFCs) access to the public tech platform for frictionless credit (PTPFC).

Earlier this week, RBI Governor Shaktikanta Das announced that the PTPFC would be rebranded as the Unified Lending Interface. He compared its potential impact on lending to the transformation brought by the Unified Payments Interface in payments across the country.

Developed by the Reserve Bank Innovation Hub (RBiH) — a wholly owned subsidiary of the central bank — the platform aims to facilitate a seamless flow of digital information to lenders. The end-to-end platform will feature an open architecture, allowing regulated entities to connect through a ‘plug-and-play’ model.

Industry sources have indicated that the RBI is considering expanding PTPFC participation to include both legacy and fintech NBFCs.

The PTPFC is designed to knit data from various sources — including central and state governments, account aggregators, banks, credit information companies, and digital identity authorities — to eliminate barriers to frictionless and timely credit delivery.

Launched in 2023, the PTPFC pilot focused on products such as fully digital Kisan Credit Card (KCC) loans of up to Rs 1.6 lakh per borrower, as well as financial support for dairy, small businesses, vehicle and tractor purchases, digital gold, and home purchases through participating banks.

The platform stitched together Aadhaar eKYC (know-your-customer), land records from participating state governments (Madhya Pradesh, Tamil Nadu, Karnataka, Uttar Pradesh, and Maharashtra), satellite data, permanent account number validation, transliteration, Aadhaar e-signing, account aggregators, dairy co-operative data, and property search data. The scope and coverage of the platform are expected to expand based on these learnings, including more products, information providers, and lenders.

According to the Report on Currency and Finance 2023-24, the PTPFC has demonstrably reduced the turnaround time for KCC loans from several weeks to less than an hour.

Speaking on the sidelines of an Associated Chambers of Commerce and Industry of India event in October last year, RBI Executive Director Ajay Kumar Choudhary reported that banks had disbursed over Rs 1,400 crore in loans via the platform since its launch on August 17, 2023.

PTPFC’s footprint is growing.

In February, the government allowed the Goods and Services Tax Network to share data (with firms’ consent) on the platform to expedite loan processing. In April, the National Bank for Agriculture and Rural Development (Nabard) developed a loan-origination system portal to facilitate digital KCC processing for co-operative banks and regional rural banks (RRBs).

Nearly 351 district and state co-operative banks, and 43 RRBs now have access to various services, including digital state land records, satellite data, KYC, credit history, and transliteration for more effective credit underwriting.

This collaboration between Nabard and RBiH is expected to streamline the lending process, reducing loan turnaround time from three to four weeks to just five minutes for the country’s 120 million farmers.

PLUG & PLAY

·         Developed by the Reserve Bank Innovation Hub — a wholly owned subsidiary of the central bank — the public tech platform for frictionless credit (PTPFC) will enable a seamless flow of digital information to lenders

·         The end-to-end platform will feature an open architecture, allowing regulated entities to connect through a ‘plug-and-play’ model

·         PTPFC will integrate data from central and state governments, account aggregators, banks, credit information companies, and digital identity authorities

·         It aims to eliminate barriers to frictionless and timely credit delivery