A new RBI platform will utilise milk supply data to lend to dairy farmers.
Synopsis
A borrower may determine their capacity to repay the loan by accessing information on the milk that dairy farmers sold to Amul or state-accessible land records through a new portal developed by the Reserve Bank Innovation Hub. Many farmers and dairy farmers are unable to secure bank loans due to a lack of credit history, but this action is considered as a solution to the issue.
Many farmers and dairy producers are unable to secure a bank loan due to a lack of credit history. However, a borrower may now obtain information on the milk that dairy farmers sold to Amul or state-accessible land records to determine their capacity to repay the loan using a new platform built by the Reserve Bank Innovation Hub, according to TOI.
The “frictionless credit” initiative, which is currently available for farm and dairy loans, is being expanded to include education loans (via the Digi Locker), MSMEs (via Udhyam registration and GST and tax records), and even vehicle and personal loans, as tests have shown that a loan can be sanctioned in less than 10 minutes.
Prior to this, an RBI study found that processing agricultural loans used to take two to four weeks and cost roughly 6% of the loan’s entire value.
“It will be the lending equivalent of ONDC.” Banks would be permitted to use data from numerous sources to make lending decisions, according to an RBI official.
The whole process is app-based, and either the borrower or bank workers may use it. Before disbursing the loan, these staff members will employ hand-held devices and biometric verification to verify the borrower’s identity and permission. Banks will handle agricultural loans, for example, using digitised bank data, the PAN, voter ID, or other government-issued ID cards.
Currently, five states have signed on, with more expected to follow. Similarly, for milk, only Amu’s database of 30 million farmers is now available. However, banks may seek satellite data or soil health assessments to establish creditworthiness for, example, a loan to produce wheat, rice, or maize. Loans are sanctioned based on a land ownership criteria created by Nabard.
When the project began, one of the most difficult challenges was convincing banks to restructure their procedures since their loan origination systems could not communicate. “Even if they had access to land records, KYC, credit scores, or other information, it was not integrated.” Similarly, each bank has to enter into individual agreements with states, making the work difficult,” said another RBI official.
