RBI Pressing For Wider Adoption Of UPI-Like Credit Platform For Farmers, MSMEs

The Reserve Bank of India (RBI) is advocating for more and more adoption of an open-source credit disbursal platform similar to the Unified Payments Interface for digital transactions, to simplify credit access for farmers and owners of small businesses.

Despite the prevalence of digital consumer loan disbursals, farmers and people who run small businesses still need to queue up at their local bank branches and the land records department for days to access agriculture loans and take Kisan credit cards. The Public Tech Platform for Frictionless Credit (PTPFC) is designed to address this issue, as reported by ET.

Lenders and startups can connect to the PTPFC platform to address the increasing demand for formal credit. The platform is currently facilitating agri loans, Kisan credit cards, small-value MSME loans, and similar products.

The Reserve Bank Innovation Hub, in collaboration with the central bank’s fintech department, is leading this programme.

In August last year, the RBI initially discussed establishing this platform for “frictionless credit.” The idea gained traction after the central bank conducted early pilots in specific districts of Madhya Pradesh, Tamil Nadu, Maharashtra and Uttar Pradesh for digital Kisan credit cards.

“Around INR 3,500 Cr worth of loans in agri and MSME have been disbursed through the platform,” a banker told ET.

Industry estimates indicate that more than 30% of farmers in the country take loans at rates as high as 3% per month from local trading hubs or moneylenders. A digital credit disbursal platform from banks can help them reduce their input posts as much as 30%, as per experts.

The platform allows technology companies to integrate and connect with banks like Union Bank of India and Axis Bank. Startups can develop consumer-facing applications for users to apply for loans digitally. This setup resembles the UPI architecture, where fintechs create front-facing apps, and the underlying transaction account is with the banks.

Since all this processing is done digitally in the backend, farmers can apply for loans with minimal paperwork. Around 120 Mn PM Kisan beneficiaries can access loans easily digitally.

Startups are also building checks to ensure red flags get raised when a defaulter applies for loans or someone tries to defraud the system.

Axis Bank is one of the major lenders using this platform for MSME loans and some agri credit as well.

The central bank aims to consolidate all data sources in one place and utilise technology for instant credit underwriting through this program.