Transforming Retail Lending in India: The Promise of 'Credit on UPI'
Ram Rastogi
Digital Payments Strategist ; Real Time Payments -IMPS / UPI ; Financial Inclusion ; Reg Tech; Public Policy
Responsible retail lending in India is entering a transformative phase with the advent of innovative platforms like Credit on UPI.
Despite a 12x growth in digital disbursements between 2017 and 2022, credit availability to underserved Indians remains one of the lowest globally. The challenge of underwriting new-to-credit and thin-file Indians, while ensuring efficient market distribution, persists. However, a forward-thinking ecosystem—comprising regulators like the RBI, banks, NBFCs, and a robust tech and DPI infrastructure—is poised to address these challenges.
Case Study: RBI’s Public Tech Platform for Frictionless Credit
The RBI’s Public Tech Platform, developed by the RBI Innovation Hub, exemplifies this forward momentum. This open platform aggregates financial and risk information from various sources—ranging from central and state governments to credit information bureaus and alternative data sources like land registers. By facilitating seamless digital underwriting, this initiative can significantly streamline retail lending processes.
Credit on UPI: An Idea Whose Time Has Come
Credit on UPI represents a breakthrough in the distribution of retail loans. Unlike traditional loans, it offers on-demand access, allowing consumers to borrow precisely what they need, when they need it. This not only enhances loan discovery but also increases the utilization of pre-approved loans. For example, banks can bundle educational loans with credit lines for student living expenses, thereby driving greater uptake.
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Impact on the Indian Ecosystem
Credit on UPI is expected to revolutionize the retail lending landscape in three key areas:
A Frictionless Environment for Unprecedented Growth
The potential for Credit on UPI to disrupt credit availability in India is immense. Beyond the expected 12% growth in retail lending between 2017 and 2026, and the current PoS lending market of INR 7.5 lakh crore, Credit on UPI could represent a $1 trillion transaction spend by 2030. It promises to eliminate friction, open up new consumer credit segments, and drive innovation in digital onboarding and dynamic product offerings.
My Opinion
The introduction of Credit on UPI is a game-changer for responsible retail lending in India. It not only enhances credit availability for underserved segments but also redefines the economics of small-ticket loans. By leveraging a vast and efficient distribution network, Credit on UPI ensures that credit reaches those who need it most, precisely when they need it. This innovation aligns perfectly with India’s financial inclusion goals, offering a frictionless environment for unprecedented growth in the retail lending sector.
Senior Manager
3 个月Very informative
Head - Enterprise Accounts at Worldline India I Ex-Pine Labs I Ex-Standard Chartered | Ex-HDFC Bank I Triathlete & Fitness Influencer
3 个月Insightful!
Great initiative! Fast and at the time of need. If UPI based credit scoring can happen it gives a platform for extending credit to underserved communities with a degree of confidence.
Former Deputy Managing Director & Chief Information Officer at State Bank of India
3 个月Very well presented. For the past few years, consumers are moving away from other digital payment channels to UPI. In a few years from now, most of the digital transactions will happen via UPI. The UPI platform, therefore, will become the warehouse of all digital payment data. With appropriate analytical models, a UPI Credit Score can be developed, perhaps at the level of NPCI. This can become an input for loan underwriting by financial institutions and, in conjunction with the CIC score, become a very reliable tool for taking credit underwriting decision in real-time.