Public sector lenders, including the State Bank of India, will jointly set up a unified cloud-based digital platform to connect with fintech companies and source loans through them on a revenue-sharing basis, reported the Economic Times, citing people aware of the matter.
Under the model, account aggregators and third-party application platform interfaces (API) will be used by fintech companies to carry out all first credit checks. The completed loan application will then be uploaded onto this electronic portal. Individual banks may access these loan requests and approve or deny them in accordance with their own internal credit risk criteria while paying a commission or fee to the fintech company that submitted the request.
The framework will enable state-run banks to access the broad network of fintech companies’ resources, lowering their own costs associated with obtaining loans and making ad hoc investments in expensive platforms or technology.
Each public sector bank’s core banking system will be connected with the proposed digital platform for payments and reporting.
Later on, it will link up with other small- and medium-sized business (SMB) account service companies, assisting banks in offering credit underwriting, transaction management, and another micro, small-, and medium-sized business (MSME) loan products.
Public sector banks have established PSB Alliance Ltd to serve as an intermediary for them.
According to the people cited above, utilizing the fintech system will enable individuals and small enterprises to shut out of the banking system to generate more affordable organized credit.
The finance ministry has urged many banks to consider partnering with cutting-edge fintech companies.
“The idea is that the fintech firms will become onboard large corporate and their suppliers or dealers for supply chain finance (SCF) business,” a senior bank executive was reported as saying by ET.
“The initiative will be led by PSB Alliance Ltd, and we are in the final stages of selecting a technology service provider to develop and manage this cloud-based platform,” the official added.
Source: Economic Times
