FRICTION-LESS
CREDITS - ECONOMY
News:
RBI set to launch pilot
for a public tech platform for frictionless credit
What's
in the news?
● The
Reserve Bank of India (RBI) has launched a pilot project in the form of a
“Public Tech Platform for Frictionless Credit”.
Public
Tech Platform:
● This
platform has been developed by the Reserve
Bank Innovation Hub (RBIH), a wholly-owned subsidiary of RBI.
Significance
of Public Tech Platform:
● The
Public Tech Platform would enable delivery of frictionless credit by
facilitating seamless flow of required
digital information to lenders.
● It
would bring about efficiency in the lending process.
● This
platform will help in making this lending process smooth and quick.
● It
will help in reducing costs, speed up
the loan process, and make it scalable.
Go
back to basics:
Friction-less
Credit:
● Frictionless
credit is a borrowing approach that seeks to streamline the lending process for
consumers.
● Unlike the traditional credit
systems, where individuals need to go through extensive paperwork, credit
checks and lengthy approval procedures, frictionless credit promises a smoother
and faster experience.
Uniqueness:
● Digital
delivery of credit (delivering credit/loans through digital means) or any loan
is preceded by a process of scrutiny known as credit appraisal.
● The
process attempts to evaluate and accordingly predict the prospective borrowers’
ability for repayment of credit/loan and adhering to the credit agreement.
● This
pre-disbursal process is particularly important for banks since it would in
turn determine their interest income and impact on the balance sheet.