18th JULY 2023 (HARYANA): Getting a loan from a bank is a real struggle for today’s farmers. But wait! RBI has a great solution for this problem as it introduces the Reserve Bank Innovation Hub that enables the data on milk sold by dairy farmers to Amul or other land records available with state government to determine the payment ability.
The initiative of ‘frictionless credit, which is prepared for dairy and farm loans, will help the government sanction the loan in just 10 minutes. It will also save the farmers time and money. Moreover, the RBI has decided to introduce this new scheme of frictionless credit for other loans such as education, vehicle, and personal loans. Thus, the new initiative of frictionless loan sanctioning will make loan sanctioning quicker and faster, as RBI’s own survey has already shown that it used to take two to four weeks to process farm loans and cost 6% of the loan amount.
According to an RBI official, “it will be equivalent to ONDC for lending. Banks will be able to tap into data from multiple resources that decide on giving loans.”
The entire procedure is app-based for both the borrower and the bank official, who will use biometric authentication and deploy hand-held devices to verify the borrower’s credentials for the loan. In the case of farm loans, the bank will use digitised bank records, a PAN card, and Voter ID to process a loan. The bank can also use the satellite-based data to determine creditworthiness for a loan to grow paddy, wheat, and maize. Similarly, for milk, Amul’s database of 30 million farmers can be accessed now. But the loan will only be sanctioned according to the land holdings of the farmers.
According to RBI, the main challenge of this project was to get banks to rework their process since their loan origination system did not interact as another RBI official says, “Even they could access land record details, KYC, Credit score or other details, it was not integrated. Similarly, each bank must get separate tie-ups, making the task tough.”
