The State Bank of India (SBI) is developing a new system to use UPI transaction data to assess the creditworthiness of small businesses that do not have GST registration.
SBI Managing Director Ashwini Kumar Tewari said the bank is confident that it will be able to provide end-to-end digital loans within a day to such businesses. The move is aimed at helping small businesses that may currently face difficulties in getting loans through the formal banking system.
Tewari said that UPI transaction records can be used as an alternative to GST data when a business does not have GST registration but has regular sales through UPI. This data could help the bank understand the cash flow and business activity of a small business before deciding whether to provide a loan.
The main difficulty comes when a small business does not have a GST number. In such cases, the bank cannot rely on GST records to understand the business’s sales and financial activity. This is why SBI is looking at alternative sources of data, including UPI transactions.
Tewari explained that there are some challenges in accessing UPI payment information. The bank from which a payment is made may not always have complete information about where the money ultimately goes. The receiving bank and the third-party payment app involved in the transaction may have additional information.
How will this work?
For example, if a shop receives regular UPI payments from customers, the bank could study the amount, number and regularity of transactions to get an idea of the business’s turnover and financial activity. SBI could then use this information along with other available banking and customer information to assess the business’s ability to repay a loan. If the business meets the bank’s lending criteria, the loan application could be processed digitally, with SBI aiming to provide end-to-end digital loans within a day.
