PSBs to place rise common digital platform to connect with fintech companies

Public sector lenders, including State Bank of India, will jointly set up a unified cloud-based digital platform to connect with fintech companies and raise loans through them on a revenue-sharing basis, people with knowledge of the matter said.

Under the model, fintech companies will conduct all preliminary credit checks through a third-party application platform interface (API) and account aggregators. They will then upload the completed loan application to this digital platform. Individual banks can access these loan requests and fund them based on their internal credit risk parameters, sharing a commission or fee with the originating fintech company.

“The idea is that the fintech companies will bring in large enterprises and their suppliers or retailers for supply chain finance (SCF),” a senior bank manager.

The framework will allow state-run banks to leverage the extensive resource base of several fintech firms, reduce their own costs by raising loans and invest individually in expensive platforms or technologies.

“The initiative will be led by PSB Alliance Ltd and we are in the final stages of selecting a technology service provider to develop and manage this cloud-based platform,” the official said. PSB Alliance Ltd is set up by public sector banks to act as an intermediary for them. The proposed digital platform will be integrated with the core banking systems of each public sector for payments and reporting.

It will then connect other small and medium enterprise (SME) account service firms, helping banks with credit underwriting, transaction management and other micro, small and medium enterprise (MSME) lending products. The Ministry of Finance has pushed the banks to explore synergies with new-age fintech firms.

Leveraging the fintech system will allow small businesses and individuals excluded from the banking system to obtain cheaper organized credit, said the people cited above. PSB Alliance Ltd is envisioned as an umbrella entity that will enable public sector banks to provide financial and non-financial banking services to the doorstep through common applications or platforms such as the proposed digital lending. Prime Minister Narendra Modi has said that the economy of any country is as progressive as the banking system is strong.

“If Jan Dhan accounts had laid the foundation for financial inclusion in the country, fintech would form the foundation for financial revolution,” he said while dedicating 75 digital banking units in as many districts.