PUBLIC TECH PLATFORM FOR FRICTIONLESS & EASY CREDIT FLOW

The Reserve Bank of India (RBI) has announced a pilot programme for 'Public Tech Platform for Frictionless Credit'.

- Ravi Mishra

It is a digital platform created by RBI's subsidiary Reserve Bank Innovation Hub (RBIH) which will enable seamless flow of necessary information to lenders and thereby help in disbursing 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. The initiative comes as part of RBI's developmental and regulatory policies and was introduced following the Monetary Policy Committee (MPC) meeting in August 2023. The whole process here rests on three pillars :

Adverse selection (information asymmetry between borrowers and lenders)

Exposure risk measurement

Default risk assessment.

Features

a) 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

b) The platform would integrate data from central and state governments, Account Aggregators (AA), banks, credit information companies, and digital identity authorities. This consolidation would eliminate hindrances and streamline rule-based lending processes.

c) The platform's scope encompasses loan to diversified sectors which includes Kisan Credit Card loans of up to Rs. 1.6 lakh per borrower, loans to dairy farmers, credit-sans-collateral to MSMEs, and personal and home loans through participating banks.