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The platform has been designed to facilitate agricultural loans, low-ticket MSME loans, Kisan credit cards and similar products
Indian farmers have perennially suffered from lack of access to institutional credit. In a move that has the potential to trigger far-reaching changes, the Reserve Bank of India is working quietly to promote use of a UPI-like open-source credit disbursal platform so that farmers and small businesses can easily get credit, The Economic Times has reported.
In a strange dichotomy, while access to consumer credit has become extremely easy and can be availed of pressing a few buttons – in many instances dangerously so – farmers and those who run small enterprise have to stand in time-wasting and frustrating queues at banks for more than a day to tap agriculture loans and obtain Kisan credit cards.
Now there is a platform to end this suffering. It is called the Public Tech Platform for Financial Credit (PTPFC) and both lenders and startups can use it. The platform has been designed to facilitate agricultural loans, low-ticket MSME loans, Kisan credit cards and similar products. A banker who is familiar with the development has told the newspaper on conditions of anonymity that the RBI’s innovation hub and its fintech department is guiding the programme.
PTPFC is drawing on the strength of different elements that are already working in the financial ecosystem to strengthen the architecture. These are IndiaStack, ONDC (Open Network for digital Commerce), OCEN (Open Credit Enablement Network) and NBFC-Account Aggregators.
“Around Rs 3,500 crore worth of loans in agri and MSME have been disbursed through the platform,” the banker said.
The move can kill more than two birds with one stone. While it can certainly make life easier and less frustrating for farmers and small business owners, it can also curb the menace of traditional and rapacious moneylenders. A digital solution can also reduce transaction costs, make the system more efficient and free up resources for more productive use.
It is estimated that more than 30% of the farmers in the country take loans at rates as high as 3% per month from local moneylenders. Any digital credit disbursal platform with the participation of banks can help drive down input costs by a commensurate margin.
The move has been facilitated by another parallel development. Several states have digitised land records, which makes it easier for lenders to do their due diligence quickly, efficiently and take a call of credit very fast.
“With many states having digitised land records, we can check the land details digitally, use satellite data to map the area, use Digilocker and Aadhaar to verify credentials of the applicant and process loans instantly. We use PTPFC for agri loans, Kisan credit cards in states like Karnataka, Maharashtra, Uttar Pradesh and Madhya Pradesh,” Timmana Gouda D, founder of Bengaluru-based WhatsLoan that distributes such loans for farmers and agricultural workers told the newspaper.
About 12 crore farmers – all PM Kisan beneficiaries – can apply for loans digitally.
One of the major banks that is already using the platform to disburse loans is Axis Bank. “They have plugged in farm records which are now digitally available. This means that there is lower risk of frauds in these data sets. Also, it is a more efficient means of credit disbursal without human intervention at every step,” Sameer Shetty, Axis Bank’s president and head of digital business and transformation told the newspaper.
The entire architecture has a striking similarity with UPI. Tech companies can use this platform to connect with banks. Companies are building applications which, potential debtors can use to digitally apply for loans.
In August 2023, RBI governor Shaktikanta Das announced the work towards such “frictionless credit”. Early success with pilot projects in some districts of Madhya Pradesh, Tamil Nadu, Maharashtra and Uttar Pradesh for digital Kisan credit cards emboldened the central bank that the system can work.
PTPFC is processing farm loans and expanding to dairy farmers, offering small business loans, two-wheeler loans and similar products. The technology is likely to enthuse lending institution since it immediately boosts the reach of their credit.
Now PTPFC is already processing farm loans and expanding to dairy farmers, offering small business loans, two-wheeler loans and such products.