Why is RBI's new pilot for frictionless credit?
Current Affairs for 21st August,23
Why is RBI's new pilot for frictionless credit?
The RBI commenced a pilot endeavoring to evaluate the feasibility of the 'Public Tech Platform for Frictionless Credit'.
The platform would strive to "enable delivery of frictionless credit by facilitating seamless flow of required digital information to lenders".
• Digital delivery of credit or any loan is preceded by a process of scrutiny known as credit appraisal. This is done to evaluate and accordingly predict the borrower's ability to repay the sum.
RBI has observed that the data required for the process rests with different entities like central and state governments, banks, credit information companies etc. This new platform would bring all of it together in a single place.
• The platform will be developed by its wholly owned subsidiary, the Reserve Bank Innovation Hub. It will have an open architecture, open Application Programming Interfaces and standards, to which all financial sectors players would be able to connect seamlessly in a plug-and-play infrastructure.
• It will help in quick credit assessments and ensure that credit is extended to a larger set of reliable borrowers.
• The borrowers too would benefit from the resulting lower cost of accessing capital, which would translate into productive investment spending.