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RBI launches innovative program to revolutionize credit access for MSMEs

  • Category
  • Published
    22nd Sep, 2023


The Reserve Bank of India (RBI) has embarked a comprehensive program focused on evaluating the feasibility of a ‘Public Tech Platform for Frictionless Credit.’


About Public Tech Platform for Frictionless Credit:

  • The initiative seeks to streamline and enhance credit delivery by financial institutions, ultimately contributing to greater financial inclusion in India.
  • Objective: The primary goal of this public tech platform is to simplify the credit appraisal process, making it more accessible and efficient for both lenders and borrowers.
  • Working:
    • Developed under the aegis of the Reserve Bank Innovation Hub (RBIH), the Public Tech Platform for Frictionless Credit is set to become an end-to-end digital solution with an open architecture, open application programming interfaces (APIs), and standardized protocols that all banks can seamlessly connect to in a “Plug and Play” model.
  • Significance:
    • By consolidating all the necessary information in one place, this initiative aims to eliminate friction in the credit access journey for MSMEs.
    • The RBI’s commitment to facilitating financial inclusion aligns with the broader goals of the Indian government and the central bank to support the growth and development of MSMEs, which are crucial drivers of the country’s economic prosperity.

What are the advantages of the platform?

  • Simplification- It simplifies the integration of vital financial data through open Application Program Interface.
  • Scalability- It ensures that credit or other financial instruments are extended to a larger set of borrowers with good credit history.
    • World Bank pointed out that improved access to information provides the basis for fact-based and quick credit assessments.
  • Productive investment- The borrowers too would benefit by the resulting lower cost of accessing capital, which would translate into productive investment spending.
  • Cost effective- This platform reduces the multiple visits to bank to avail formal credit and costs associated with it.
    • RBI survey indicated that processing of farm loans took 2 to 4 weeks and costs about 6% of the loan’s total value.
  • Improves Efficiency- It centralizes potential borrowers information on a unified platform streamlines processes.
  • Seamless- The participation of banks, NBFCs, fintech firms, and start-ups in this platform aligns with the dedication to seamless credit and payment solutions.
  • Foster innovation- The 'plug and play' model encourages innovation, driving the lending sector towards greater accessibility, cost reduction and efficiency.

Similar Initiatives:

  • EASE Reform: It was launched in January 2018 jointly by the government and PSBs.
  • It was commissioned through Indian Banks’ Association and authored by Boston Consulting Group.
  • It aims to foster new-age reforms in PSBs to improve profitability, asset quality, customer service and digital capabilities.

The EASE 1.0 report showed significant improvement in PSB performance in resolution of Non-Performing Assets (NPAs) transparently.


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