State Bank of India (SBI) is developing a new lending system that could assess the loan eligibility of small businesses using their UPI transaction data.
SBI Managing Director Ashwini Kumar Tiwari shared details about the planned system and explained how digital payment records could help businesses that do not have GST registration.
SBI UPI Loan System for Small Businesses
The proposed SBI UPI loan system is being developed mainly for small businesses that have regular sales and receive payments through UPI.
According to Ashwini Kumar Tiwari, regular UPI transactions can provide an indication of a business’s sales. SBI is working on a UPI-based solution that could use this information to assess the loan-acquisition capacity of businesses without GST registration.
The system could be useful for small shopkeepers, traders and other businesses that have regular digital transactions but may face difficulties while applying for traditional bank loans.
Why UPI Data Can Help With Loan Eligibility
SBI has already addressed the challenge of lending to businesses registered under GST. According to Tiwari, the bank can disburse loans to such businesses within around 10 minutes.
Over the last 18 months, SBI has disbursed loans worth ₹1 lakh crore using GST and PAN data.
However, businesses without GST registration can be more difficult to assess because the bank may not have the same level of financial information.
In such cases, alternative data can become important for assessing the business and its ability to repay a loan.
How UPI Transactions Could Be Used
Tiwari explained that when a customer makes a UPI payment, the lending bank may not always have complete information about where the money is going.
The receiving bank and the third-party payment application facilitating the transaction can have more information about the payment. With the customer’s consent, this information could potentially be used as part of a model to assess loan eligibility.
SBI is also looking at other sources of information, including data from telecom companies. These different data sources could be combined to build a broader picture of a small business’s financial activity.
Small Businesses Could Get Easier Access to Credit
If the new system is successfully implemented, it could make access to bank credit easier for small businesses that do not have GST registration.
Businesses with regular operations and a strong record of receiving digital payments through UPI could potentially benefit from this approach.
The proposed system could also help address some of the credit-related difficulties faced by small shopkeepers, traders
and other small businesses that may not have enough traditional financial data for a conventional loan assessment.
