Data on milk supply will be used via a new RBI platform for dairy farmer loans

18 Jul 2023 , 01:31 AM

Due to a lack of credit history, many farmers and dairy farmers find it impossible to get a bank loan. But now, according to TOI, a borrower can use a new platform developed by the Reserve Bank Innovation Hub to access data on the milk that dairy farmers sold to Amul or state-accessible land records to determine their capacity to repay the loan.

The ‘frictionless credit’ initiative, which has so far been ready for loans for farms and dairies, is being proposed to be expanded to include loans for education (using the Digi Locker), MSMEs (based on Udhyam registration and GST and tax records), and even loans for cars and personal use since tests have shown that loans can be approved in less than 10 minutes.

Before this, the processing of farm loans took two to four weeks and cost around 6% of the overall loan amount, according to a survey the RBI conducted.

‘It will be the lending equivalent of ONDC. To make lending decisions, banks will be permitted to use data from a variety of sources, according to an RBI official, who talked to TOI.

The entire process is app-based, and both the borrower and bank staff are able to use it. Before disbursing the loan, these employees will use handheld devices and biometric authentication to confirm the borrower’s identity and consent. Banks will execute farm loans, for instance, using digital bank records, voter IDs, PANs, and other government-issued ID cards.

Five states are now participating, and more are expected. Similar restrictions apply to milk; at the moment, only Amu’s database of 30 million producers can be accessed. Banks can, however, seek access to satellite data or soil health assessments to assess a borrower’s creditworthiness for, example, a loan to finance the production of wheat, paddy, or maize. Loans are approved using a methodology created by Nabard.

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