Public sector banks can use data from Aadhaar and income tax department to give bank loans
As per norms, KYC must be confirmed by banks for loan provision
Chief Economic Advisor KV Subramanian has advocated for the creation of a GSTN-like entity, called PSBN (PSB Network), to use technology for screening and monitoring those who take bank loans. The Economic Survey, authored by Subramanian, has suggested the creation of a fintech hub for PSBs to allow banks to screen borrowers.
The report states that identity verification agencies like the UIDAI, which issues Aadhaar, and the income tax department, can validate identity of customers seeking bank loans. As per norms, KYC must be confirmed by banks for loan provision. Based on KYC and underwriting, the system will assess customer eligibility of loans and transfer all the information to the PSBs.
Bank loan sanction workflow under PSBN:
1) Customer contact: Customer approaches the public sector bank and indicates the amount and type of loan he or she wishes to borrow.
2) KYC verification: PSB transfers the above information to the entity. The entity will complete KYC process for customer based on data provided by identity verification agencies e.g., Aadhaar based e-KYC. The engine will collate data and pass on to PSBs for KYC confirmation.
3) Data collections: The engine will further collate data from various data sources based on customer profile. Data will be collected from account aggregators, government sources data, Credit Bureau data and alternate data.
System will have complete credit underwriting, which refers to generating credit profile of the customer after analysing all available data, based on the model built into it. Different AI-ML underwriting models will be built for different types of customers such as individuals, SMEs and large corporations.
4) Loan provision: Based on KYC and underwriting, the system will assess customer eligibility of loans and transfer all the information to the PSB. On the basis of the information provided, PSB can take the decision on the amount and the rate at which the loan is to be given.
