Lending API-fied : Start of P2P Lending Revolution
National Payments Corporation of India (NPCI) has revolutionised Indian Payment Industry and has removed friction. Newer payments platforms like IMPS, UPI, BBPS etc have solved payment and collection problems of all customer segments. NPCI has change the market by standardising and securing APIs across banks. UPI is classical API use case, which is simplifying mobile payments for P2P as well as Merchant Payments.
On the lines of payments, there is urgent need to revolutionize Lending in the country through technology intervention by an organisation similar to NPCI. I am calling the entity as National Lending Corporation of India (NLCI) for now.
Who would be benefited?
- Borrowers as well as lenders would be able to participate in this P2P revolution. The rate of interest of loan would get moderated to acceptable levels in open pan India market place.
High level flow of Lending Process (and the APIs) is given below:
- Loan Request API (sent by Retail Borrower): Standard API for request for loans from a specific person (like VPA of the lender in UPI parlance) or for generic listing of loan requests. This would include the amount of loan, expected duration (range), type of loan (EMI based).
- Data enrichment of Loan Request API (by NLCI) : Aggregation of critical customer credit data from CIBIL and key alternate sources for sharing with lender.
- Loan Inquiry API (Retail or Institutional Lender): This entity would be able to run inquiry for a loan based on key inputs like expected Credit Score, Amount, Type of Customer etc. Incase, the loan request is sent specifically in their name (i.e. VPA), the loan request would be available in their queue for acceptance or rejection (similar to UPI collect request).
- Loan Confirmation API (Retail or Institutional Lender): Lender would be able to approve the loan or reject the loan.
- Loan accounts would be maintained to NLCI platform for accounting and processing.
What happens next post Loan Confirmation?
- Loan agreement would be digitally generated, signed and delivered to both the entities.
- Loan would be disbursed by debiting Lender’s account and crediting Borrower’s account online. This would similar to processing of UPI collect request.
What is the process post disbursement?
- Loan instalments would be deducted (based on structure of the loan) on regular basis and credited to lender. This would be based on UPI / IMPS transaction.
- Incase of default, there would be 7 days (variable) given for funding of the account. System will generate reminders to the customer for payment.
- Incase of non recovery, the borrower would not be allowed to take more credit, The detailed information on the defaulter would be shared on platform as well as with lender for recovery.
- Flow post default may be standardised to blocking of account / stoppage of credit etc. Offline process of recovery
In the process, which all entities would be involved?
- NLCI: This entity would run the entire platform with market participants. They will tie up with external credit / alternative information provider for credit assessment.
- Lending Service Provider (LSP): This entity would allow retail borrowers and lenders to participate in transparent. Borrower and lender may have same LSP or different LSP. LSP would be able to further innovate and create value adds for the borrower as well as lender. The fee for LSPs would be standardised for each loan disbursed / collected.
This platform would give impetus to Financial Inclusion and would help the P2P lenders to innovate on top of Pan India Lending Platform. This is similar to what PSP apps are currently innovating on top of UPI Platform.