The Reserve Bank of India (RBI) on Thursday said a platform for frictionless credit delivery through digital process used in Kisan Credit Card (KCC) will be made available for other loans to deepen financial inclusion.

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For digital credit delivery, the data required for credit appraisal are available with different entities like the Central and the state governments, account aggregators, banks, credit information companies, digital identity authorities, etc.

However, the central bank said that they are in separate systems, creating hindrance in frictionless and timely delivery of rule-based lending.

To address this situation, the RBI on September 2022 announced a pilot project for digitalisation of KCC loans of less than Rs 1.60 lakh. The pilot tested end-to-end digitalisation of the lending process in a paperless and hassle-free manner.

Currently, the KCC pilot is underway in select districts of Madhya Pradesh, Tamil Nadu, Karnataka, Uttar Pradesh, Maharashtra and the initial results are encouraging. The pilot also enables doorstep disbursement of loans in assisted or self-service mode without any paperwork.

A similar pilot is being carried out for dairy loans based on milk pouring data with Amul in Gujarat. Based on the learnings from the above pilots and expand the scope to all types of digital loans, a digital Public Tech Platform is being developed by the Reserve Bank Innovation Hub (RBIH).

The platform would enable delivery of frictionless credit by facilitating seamless flow of required digital information to lenders.

"The RBI's decision to extend the platform used for KCC to other loans is aimed at deepening financial inclusion. By creating a system for frictionless credit delivery through a digital process, the RBI seeks to streamline and simplify the loan application and approval process for a broader population," said Nitin Purswani - CEO at Medius AI.

"This measure is essential in a country where a significant portion of the population is still underserved by traditional banking channels. By leveraging technology and the successful model of KCC, this initiative can reduce bureaucracy, cut processing times, and make financial products more accessible to people in remote or underserved areas. Ultimately, it contributes to the economic empowerment of individuals and small businesses by ensuring that credit is more widely and easily available," Purswani added.

The end-to-end digital platform will have an open architecture, open Application Programming Interfaces (APIs) and standards, to which all financial sector players can connect seamlessly in a ‘plug and play’ model.

The platform is intended to be rolled out as a pilot project in a calibrated fashion, both in terms of access to information providers and use cases. It shall bring about efficiency in the lending process in terms of reduction of costs, quicker disbursement, and scalability.

The KCC scheme, launched in 1998, allows farmers to purchase agriculture products and services on credit. The central government provides interest subvention of 2 percent and prompt repayment incentive of 3 percent to the farmers, helping them avail credit at a rate of 4 percent.

The RBI on Thursday left the key policy rate — repo rate — unchanged at 6.50 percent. RBI Governor Shaktikanta Das said that the six-member monetary policy committee (MPC) unanimously decided to keep the lending rate unchanged at 6.50 percent.

The central bank’s committee also retained its withdrawal of accommodation stance to ensure that the retail inflation remains within the target of 4 percent.

"As we enter the festive season, the unchanged repo rate will play a role in enhancing credit demand for both personal and business loans, and aid in sustaining credit momentum for additional business growth. RBI’s decision to establish a framework for bringing more transparency for reset of interest rates on floating interest loans, which will further reinforce consumer protection,” Abhay Bhutada, MD, Poonawalla Fincorp.

First Published:Aug 10, 2023 10:53 AM IST