Trusted credit information: Enabler to inclusive growth

Hindustan Times

2 days ago

India's digital public infrastructure (DPI) has become a global benchmark for how open, interoperable systems can drive inclusive growth. Aadhaar has transformed identity access; UPI has revolutionised digital payments; DigiLocker and eKYC have simplified consent. These together form the foundational layers of DPI and have enabled individuals to participate in the digital economy with ease. A critical facet of our country's digital-first growth has been the enablement of digital credit, that is backed by a robust credit information system. DPI (Getty Images)
Access to affordable, timely credit remains one of the most powerful levers for upward mobility. In the past, millions of Indians remained outside the reach of formal lending institutions, leading to a situation where informal lending systems had taken over the ecosystem thereby exposing the common people to unregulated interest rates and extortion. The government duly recognised this challenge, and an imminent need to bring more people within the formal credit system to steer growth. As a result of concerted efforts, the number of consumers monitoring their credit profile grew by 51% year-over-year in 2024.
However, larger challenge was that millions of people were invisible to traditional credit scoring systems because they rely heavily on past borrowing history, which excludes those who primarily transacted in cash or used bank accounts only for basic services. As a result, financial institutions struggled to assess risks. This was promptly addressed through the digital revolution, particularly the growth of digital payments. A broader set of data was now made available for a fuller, real-time view of the borrower's financial behaviour. With consent through Aadhar or eKYC, data has been used to make lending decisions that are faster, fairer, and more inclusive.
The traditional credit information ecosystem, particularly credit bureaus, has played a central role in helping lenders assess borrower risk through credit scores and repayment history. These institutions provide structured, regulated, and widely accepted data that underpin a large share of formal credit decisions today. As the financial ecosystem evolves, efforts such as the proposed Public Credit Registry (PCR) and the Account Aggregator (AA) framework aim to complement existing systems by enabling broader, consent-based access to verified financial information. It has been emphasized that building an integrated infrastructure that include alternate data like utility payments and trade credit will enhance risk management and improve inclusion for borrowers with limited credit histories.
This is relevant as accurate picture of an individual's or business's financial behaviour enables more responsive and reliable lending decisions. Credit scores remain a core input for most lenders, offering a trusted snapshot of repayment discipline and financial stability. For digital lenders offering products such as Buy Now, Pay Later (BNPL) or working capital loans, this foundational data helps determine eligibility and pricing. Increasingly, lenders are combining bureau data with other verifiable financial information, such as bank transactions, GST filings, and digitally shared cash flow patterns, to enhance underwriting models and reduce approval times. For instance, a pilot by Capital Float demonstrated how integrating Aadhaar-based eKYC, UPI for payments, and Account Aggregator-enabled data sharing with traditional risk frameworks enabled microloan approvals in as little as 45 seconds.
Globally, the case for strong credit information systems is well established. Research indicates that countries with complete credit data coverage see a 47.5% higher private credit-to-GDP ratio than those without. That means more capital flows to small businesses, more households able to invest in education or housing, and greater resilience in the financial system.
India's opportunity lies not just in building new systems, but in strengthening and extending the trusted infrastructure already in place. Credit information has played a critical role in enhancing formal lending in our country. To scale trusted and safe credit, a four-pronged strategy is required.
First, real-time reporting must become standard across all lenders to match the pace of digital decision-making. Second, interoperability is vital where data should flow seamlessly between banks, NBFCs, fintechs, and platforms, with credit bureaus continuing to play a stabilising role. Third, privacy and consent must remain foundational. And fourth, the system must be accessible to all, with multilingual tools, clear credit report access, and easy dispute resolution.
As new credit products have gained ground, the need for a shared, trustworthy credit information backbone becomes even more urgent. This will enable a trust first ecosystem, where borrowers, lenders and regulators can operate with transparency. Access to credit will be the fuel for the next wave of entrepreneurs and industrial growth.
This article is authored by Alkesh Kumar Sharma, member, public enterprises selection board and former secretary, ministry of electronics and information technology (MeitY).