Banks can be history unless they evolve into a new age digital bank: RBI

The Reserve Bank of India (RBI) said Monday that traditional banks would need to evolve into new-age digital banks to stay operational as financial technology (FinTech) lending companies are fast becoming an alternative source for small and medium-sized enterprises (MSMEs) showed up. . “The age of FinTech is here and there is no time to lose for the established banks. The banks that do not quickly transform into a digital bank of the new age are at risk of becoming history, ”said Deputy Governor of the RBI, SS Mundra.

He spoke here at the inaugural NAMCABS (National Mission for Capacity Building of Bankers for Finance MSME Sector) seminar organized by the College of Agricultural Banking. “FinTech lending companies and marketplace-based lending therefore have the fundamental potential to emerge as an alternative source of finance for small businesses,” said Mundra.

He said banks need to see the success of the FinTech ecosystem as an opportunity rather than a threat.

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“FinTech companies have taken advantage of the growing advances in technology and the proliferation of smartphones and targeted niches in small and medium-sized enterprises (SMB) lending to fill the small business funding gap with innovative and flexible credit products,” he added.

Potentially, MSME borrowers can apply online in minutes, select the repayment terms they want, and have funds in their bank accounts with minimal effort in 2-3 days, Mundra said.

“There are few documentation requirements, very short processing times and flexible loan sizes and terms,” ​​he said.

According to the International Financial Corporation (IFC), there is a funding gap of $ 2.1 to $ 2.6 trillion for all formal and informal MSMEs in emerging markets alone, representing 30 to 36 percent of currently outstanding MSME loans, he added added.

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