Digital lenders seek additional access to user data to underwrite loans efficiently
Bengaluru: The Digital Lenders Association of India (DLAI), an industry body consisting of online lenders and non-banking financial companies (NBFCs), said that to underwrite loans efficiently, they require additional access to user data from telecom and banking sector, and data from GST return filings, in recommendations to the finance ministry.
As of now, online lenders that have in-house NBFCs are allowed to access credit spending history of users from credit bureaus like Credit Information Bureau India Limited.
To find potential borrowers, banks and online lenders have to underwrite loan applications using a pre-defined set of parameters. This allows them to find the most suitable borrower from a pool of loan applications.
Online lenders use additional parameters like social media score to underwrite loans, and DLAI said in its submission to the government that more access to borrower data will help them underwrite loans efficiently.
“Utility companies and telcos must be mandated to report payments of dues to the (credit) bureaus. This will especially help in enabling credit to customers without prior credit record,” said DLAI in its submission. However access to such data should be based on a consent mechanism, where users will have to first provide their approval to share such data, a spokesperson for DLAI told Mint.
The association added in its submission that online lenders should also be able to “directly retrieve” transaction-related data from banks, instead of going through intermediaries like CIBIL. For this, it suggested creating an application programing interface (API) to gain access to banking data.
“The ability of lenders to directly retrieve transaction data from the borrowers’ bank account will go a long way in eliminating fraud and improving access to credit. With most of this data already available, it would be easier for prospective lenders to get this directly from banks through APIs as against using intermediaries,” DLAI said.
It also requested API-based access for sourcing goods and services tax (GST) data. “As the whole country has already adopted and started filing GST returns, getting open API access to the GSTIN database will allow lenders to verify the authenticity of invoices, purchase orders and cross verify business income from the financials,” added DLAI.
DLAI’s request to the government comes at a time when the debate around privacy and security has taken centre stage. A data protection bill is currently being considered by the ministry of electronics and information technology which broadly looks at ensuring privacy of individuals and how personal data is stored and retrieved. The ministry had put out a consultation paper on this topic last November.
In addition to this, the Telecom Regulatory Authority of India and the Reserve Bank of India (RBI) are also consulting on data protection regulations for their respective sectors.
Apart from access to additional user data, the DLAI also put forth recommendations including expanding funding sources for online lenders, better paperless on-boarding for borrowers, and expanding lender’s access to provide credit to small and medium industries.
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