Solutions

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Public, Private, and Small Finance Banks can grow in India by expanding their presence, offering consumer and affordable loans, and increasing deposits. They can use the franchise (merchant aggregators or business correspondent network) model to reach more customers and improve services with macroeconomic strategies.

Some loan companies can boost their profits by deploying funds allocated for Priority Sector Lending (PSL) to reliable borrowers. This supports the objective ofpositive social impact by strategically expanding agricultural and MSME loans based on macroeconomic insights.

Non-Banking Financial Companies provide consumer loans, affordable home loans, and MSME loans to expand their AUM without adding new branches or using a hybrid-plus agent model. They leverage local microeconomics for this purpose. Envisaging rapid scalability, they plan to achieve this through a franchise network, intending to replace local informal lending with formal credit options. Early signs in construction, like roads or housing, offer a first-mover advantage. Economic indicators highlight areas where MSMEs are experiencing growth.

Credit planning is a crucial process for any progressive states in India to drive economic growth. The State Level Banking Committees (SLBC) for each state employ an appraisal-based credit planning process. This analyses the performance of the previous year and aggregates growth ambitions for the coming year to determine the plan.

 

Current processes involve individual banks at the block level being responsible for aggregating their credit plans to feed into a district plan. A District Credit Committee combines all the credit plans created by banks to form a district level plan. Subsequently, the SLBC combines credit plans from various districts to form the state-level credit plan. Outcomes derived from the credit plan are used by the Development Banks (e.g. NABARD & SIDBI) to design policies and implement them to accelerate Priority Sector Lending (PSL). 

Development Banks encounter similar challenges in creating credit plans and designing credit guarantee policies that accurately track local economics. Addressing these challenges requires driving digitization and establishing consistent, evidence-based digital credit planning.
 

The BCNet Economic Locator and can help state-run SLBCs with a digitalized credit planning sytem - enhancing a collective Analysis Based Credit Planning Methodology to one that is directly based upon data - a Digitalized Credit Planning Methodology. The key pieces of data produced by BCNet can thereby potentially help support affordable home finance and expanding the Priority Sector Lending (PSL) digital credit plan.

This digitalized, data driven approach is crucial:

- for offering hyper-localized credit borrowing and repayment patterns that help focus credit planning by overlaying demand and supply indicators that are generated from high-frequency datasets,

- to provide advisory services suggesting growth targets, offering alerts to design contextual credit guarantees, and giving recommendations for Priority Sector Lending (PSL) based on economic insights,

- by delivering digital dashboards for remote monitoring, facilitating more frequent reviews, and enabling coaching alerts to support initiatives that improve repayment behavior,

- through the use of uniform macroeconomic assessments, providing a consistent and objective tool for making credit planning decisions.