The time has come for public sector banks (PSBs) to make the entire lending processes around small-ticket loans (say ₹10,000 to ₹15,000) to borrowers a paperless and cashless exercise, leading players in financial inclusion and business correspondents industry has suggested.

Micro loans can be sourced, processed, and collected seamlessly and efficiently across the country if lenders adopt technology, they said.

It is being pointed out that PSBs still rely on paper-based laborious documentation for micro loans even during Covid-19 times. If the banks are going to follow pre-Covid manual processes, then business in form of loan growth is not going to increase dramatically as it should, they said.

Same-day sanction

If the objective is to push loans in the system, then the RBI has to urgently look at ensuring same-day sanction or T+1 sanction process by automating the whole process end-to-end and not asking the customer (small-time borrowers) to fill severaldocuments and agreements.

Sasidhar Tumulri, CEO Basix Subk, said that since BCs are entrenched in the first mile and are equipped with digital tools such as smartphones/tabs and biometric devices, they are well positioned to source small-ticket loans. “However, lending processes should be made paperless and cashless to enable easy distribution of credit through this channel. Since KYC, credit bureau check, geotagging, image recognition, and document validations can be done digitally today, microloans can be sourced, processed and collected seamlessly and efficiently in a large scale if lenders adopt technology and offer the access to these platforms to BCs,” he said.

Seema Prem, CEO of FIA Global said that PSBs and Regional Rural Banks (RRBs) should quickly leverage the huge digital infrastructure they have set up for lending in sub-urban and rural India. “Low-ticket loans of ₹10,000 to ₹15,000 for MSMEs and street vendors should be done digitally. e-stamp duty, e-sign and Aadhar authentication should be used to ensure digital and paperless loan transaction”, she added.

The RBI should quickly come out with a policy to minimise exclusion of the credit invisible. They need to quickly go to the drawing board to define policies and processes for low ticket micro-loans, she said.

Vijay Pratap Singh Aditya, CEO and Co-founder, Ekgaon Group, said that critical to collateral-free digital lending is ‘trust’. “In situations where credit score do not truly offers solutions for potential customers such as farmers and street-vendors with unsteady incomes, it is imperative to rely on human touch points that understand the customer’s cash flow and solvability, has a transactional relationship, and enough leverage to ensure repayments. BC agent is suitably placed for providing such small loans,” said Aditya.

“ At www.ekgaon.com we have offered farmers paperless collateral free crop loans since 2019 with 100 per cent repayment.”

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