Public Sector Banks (PSBs) need to increasingly connect or forge partnerships with technology partners and move towards the Banking as a Service (BaaS) model / Banking 4.0 model in the next decade, according to a report by State Bank of India’s economic research department.

This will allow banks to rapidly innovate and expand their product and service offerings through a collaborative partner ecosystem.

This could happen by providing easy access to digital lending to SME (small and medium enterprises) with minimal paperwork; digitalising agriculture lending by bringing in GIS (Geographic Information System) and other data intensive technology; leveraging best practices of agri-tech will enhance credit absorption capacity; among others, per the report.

“Green financing will be the focus to promote sustainability goals. Liabilities will be raised through Green bonds and similar liability raising instruments. Projects having carbon footprints will get into negative finance list,” the report on the Union Budget FY23 said.

It emphasised that PSBs can play a significant role in India’s quest towards truly Atmanirbhar (self-reliance) by ensuring a simplification of lending process to ensure credit delivery catering to all segments of the population, especially to the agriculture and manufacturing sectors.

SBI’s ERD team noted that the ecosystem created now in terms of Central Repository of Information on Large Credits (CRILC), Insolvency and Bankruptcy Board of India (IBBI), etc will mature and enhance confidence of the lenders to take professional decisions expeditiously. This transition will enable the PSBs to truly own the customer value chain.

Banking 4.0 and Industry 4.0

The report observed that now the Fourth Industrial Revolution will use Green Hydrogen & EV (carbon neutral fuels) is building on the digital revolution that has been occurring since the last four decades.

“It is characterised by a fusion of technologies that is blurring the lines between the physical, digital, and biological spheres. It is this interlinkage between an Industry 4.0 Model and Banking 4.0 model that we must constantly pursue in the next 25 years i.e., during Amrit Kaal (best and auspicious time)!”, the report said.

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