PM monitoring Niti project to ensure credit for bottom of pyramid borrowers

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MUMBAI | NEW DELHI: Millions of daily wage workers, small farmers and beneficiaries of various government welfare schemes may soon get access to organised credit through a project that is being directly monitored by the Prime Minister Narendra Modi’s office.

The government has commissioned Niti Aayog to lead the development of the digital network which would involve banks, fintech companies and fiduciary intermediaries working in tandem to underwrite small ticket loans to bottom of-the-pyramid borrowers through the existing direct benefit transfer (DBT) infrastructure, multiple sources directly aware of the matter told ET.

The project, which was in consultation process over the last two months, has now gathered steam with the government think-tank led by its CEO Amitabh Kant having presented two prototypes forming the key cog of the model to PM Modi for reviews in a virtual meeting held last Friday.

The first prototype involves a network of top lenders on Jan Dhan coming together to create a DBT-based digital lending protocol called Cash over Internet, or ‘Kashi.’ While details are yet to be finalised, the repayments on these loans will be structured in such a way that future DBT inflows to the beneficiary borrowers’ account will be deducted every time they access credit, a source with knowledge of the discussions said.


A senior government official told ET that the simple idea behind the Kashi model is to address the mismatch between “expenditure and income” of people who get assured income every month by way of DBT but nobody is ready to give them credit on it.

“This is a model of micro-credit based on a pattern of repayment for the underbanked of the country,” the official said requesting not to be identified. For the project, the government will partner with the banks which will decide the credit and the repayment terms based on individual account history and money flow in the coming months under various DBT schemes.

“Deciding the credit amount and the terms of repayment will be the prerogative of the banks and there can be a varied degree of flexibility on it,” added the official.

The second prototype discussed in the meeting is an integrated Know Your Customer data-sharing protocol, called the ‘KYC Setu’, which can be used by the financial institutions—including insurance companies — to vet the credentials of a prospective bottom-of-the-pyramid borrower without repeated authentications.

KYC Setu will allow customers who have already vetted their credentials with a bank to avoid repetition of the process for accessing any other financial product. The interoperability in data sharing will be ensured using National Payments Corporation of India’s (NPCI) Unified Payments Interface rails.

“The mechanism that will be used to exchange KYC information between different financial entities will be the same that is used to exchange information between different bank accounts through UPI,” the official quoted above said.

For beneficiaries not on UPI an alternative is being envisaged where the KYC data would be fetched from the government’s central KYC repository.

“Products such as Kashi and KYC Setu must act as enablers for street vendors,” PM Modi was quoted as saying by Niti Aayog on Twitter on Tuesday. “If we are able to free them from the debt trap created through informal lending, imagine the number of people whom we can bring out of poverty.” While Niti Aayog didn’t divulge on the details of the meeting, sources told ET that the Prime Minister has asked the NPCI to provide all support to Niti Aayog in developing the project over the upcoming months.

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