Amid the ongoing farmer protests, that has reached the shores of the capital, many issues concerning the farmers have been brought to the light, one of them is credit and the servicing of that debt. In a new development, the Reserve Bank of India is pushing for wider adoption of credit disbursal platforms by farmers and MSMEs. These platform are similar to the successful UPI (Unified Payments Interface).
Despite the commonality of disbursing consumer loans through digital interfaces, farmers and small business owners often still face the inconvenience. Many of them are said to be put in the conundrum of having to queue up at their local bank branches and land records departments for several days to access agricultural loans and obtain Kisan credit cards.
The greater rationale behind this drive to push stakeholders towards the Public Tech Platform for Frictionless Credit (PTPFC) is attaining a certain 'frictionless credit' process, as the RBI governor Shaktikanta Das had put it.
One of the main reasons sighted behind the push, is the statistic that claims, that over 30 per cent of farmers in India take loans at rates as 3 per cent and more, from moneylenders, potentially driving them closer to debt. A digital disbursal system on the other hand will bring down the expenditure by 30 per cent.
Seamless credit
Some of the other factors include promotion of open access to credit through open standards and interoperability between system. This is also expected to credit available to borrowers at lower cost. Given the ambiguity in the existing system, it could also help tackle miscommunication between borrowers and lenders. And finally bring all the resources under one roof, by gathering combining the forces of banks, NBFCs, fintech and data analytics companies together.
As of now, loans worth Rs 3,500 crore have been disbursed through the platform to farmers and MSMEs.
Bottlenecks on path
But another major concern of course is in the education of the system. The reliance on the existing avenue of procurement of resources, and the inability to move away from the said avenues is another factor. In India, a large part of the workforce is in the unorganized sector, and this sector is loosely bound without a streamlined and unified system governing its tenets, including expenditure. One salient feature of the protests, that stood out in the past, and even now, is the level of mistrust in private players, greater bandwidth of availability and services, that the traditional money lenders provide. This could plague the prospects of adoption and adaptation of the agricultural and MSME sector into this paradigm of Public Tech Platform for Frictionless Credit, as inability to shift into the system remains a bottleneck for a smooth transition, that will not be as swift as the UPI revolution which reached the shores of other countries as well.
