PSBs to set up infrastructure to join digital platform to connect with fintech companies By CIOTechOutlook Team

PSBs to set up infrastructure to join digital platform to connect with fintech companies

CIOTechOutlook Team | Wednesday, 04 January 2023, 05:44 IST

According to those with knowledge of the situation, public sector lenders like the State Bank of India would work together to establish a single cloud-based digital platform to interact with fintech businesses and obtain loans through them on a revenue-sharing basis.

According to the model, account aggregators and third-party application platform interfaces (APIs) will be used by fintech companies to carry out all first credit checks. The completed loan application will then be uploaded onto this electronic portal. Individual banks may access these loan requests and approve or deny them in accordance with their own internal credit risk criteria while paying a commission or fee to the fintech company that submitted the request.

The plan is for fintech companies to partner with large corporations, as well as those companies' suppliers and dealers, to do supply chain finance (SCF) operations.

The framework will enable state-run banks to access the broad network of fintech companies' resources, lowering their own costs associated with obtaining loans and making ad hoc investments in pricey platforms or technology.

"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 has been set up by public sector banks to act as an intermediary for them.

Each public sector bank's core banking systems will be connected with the proposed digital platform for payments and reporting.

Later on, it will link up with other small- and medium-sized business (SMB) account service companies, assisting banks in offering credit underwriting, transaction management, and other micro, small-, and medium-sized business (MSME) loan products.

Banks have been urged by the finance ministry to consider partnering with cutting-edge fintech companies.

According to the individuals described above, utilising the fintech system will enable individuals and small enterprises shut out of the banking system to generate more affordable organised credit.

PSB Alliance Ltd. is envisioned as an umbrella organisation that will allow public sector banks to provide financial and non-financial banking services right to customers' doorsteps via shared applications or platforms, such as the proposed digital lending platform.

The economy of every nation is as progressive as its financial system, according to Prime Minister Narendra Modi.

"If Jan Dhan accounts had laid the foundation of financial inclusion in the country, then fintech would form the basis of financial revolution," he said while dedicating 75 Digital Banking Units in as many districts.