State Bank of India, India’s largest lender, is developing a lending solution that will use UPI transaction data as a proxy for sales to extend loans to small businesses that do not have Goods and Services Tax registration, Ashwini Kumar Tewari, Managing Director, SBI, said at the Global Fintech Fest on Friday.
“UPI can substitute GST if regular sales are happening through it. We are developing the UPI solution without GST,” Tewari said.
SBI already processes business loans in about 10 minutes for customers with GST registration, PAN and other required data, Tewari said. The bank has disbursed Rs 1 trillion of such loans over the past one-and-a-half years.
The challenge now is to extend automated lending to businesses outside the GST system using UPI transaction data and other payment behaviour, subject to consent, he said. The aim is to build a profile of a small business based on its spending and revenue patterns even when those revenues are not readily available or regular.
The use of digital transaction data could mark a shift in how banks assess small businesses.
Asked whether the banking industry was moving from balance-sheet-based financing towards cash-flow-based lending, he said: “The banking sector is getting into cash flow.” The caveat, he said, is that the cash flow has to be visible through digital channels rather than physical cash.
For GST-registered businesses, the remaining friction in SBI’s automated lending process is a site visit to verify the existence of a shop or business premises. Tewari said such checks were still necessary because these processes could otherwise be gamed.
For businesses without GST registration, UPI could provide a digital trail of sales activity that lenders can use in underwriting.
Tewari said the approach could help address what he described as the funding gap in the MSME sector, particularly among micro businesses that have limited financial savings. “They are too small, they are micro. And unless we solve for micro, this segment doesn’t get solved,” he said.
Tewari flagged wallets as a potential way to reduce pressure on banking infrastructure, suggesting that transactions of up to Rs 100 could be handled through wallets.
Tewari said voice-based, multilingual and AI-driven services could further simplify access to credit, allowing customers to ask for a loan in ordinary language and have the request converted into the processes required by the bank.
