State Bank of India is developing a revolutionary lending solution that will use UPI transaction data as a proxy for sales to extend loans to small businesses without Goods and Services Tax registration. According to reports from Business Standard and The Economic Times, Ashwini Kumar Tewari, Managing Director of SBI, announced this development at the Global Fintech Fest on Friday. The bank aims to build a profile of small businesses based on their spending and revenue patterns even when those revenues are not readily available or regular. As reported by The Economic Times, Tewari explained that "UPI (Unified Payments Interface) can substitute GST (goods and services tax) if regular sales are happening. We are developing a UPI solution (for businesses) without GST, and we will use that (UPI transactions) as a proxy for sales."
The bank has set an ambitious target to provide end-to-end digital loans within a single day for eligible borrowers without GST registration. According to The Economic Times, Tewari stated that this initiative will help address concerns about businesses being left outside formal finance. The bank has already demonstrated significant success in automated lending for GST-registered businesses, with the bank processing business loans in about 10 minutes for customers with GST registration, PAN and other required data. As reported by Business Standard, the bank has disbursed ₹1 trillion of such loans over the past one-and-a-half years over the last 18 months.
For businesses without GST numbers, SBI is developing alternative data inputs to establish creditworthiness. As reported by The Economic Times, Tewari explained that "Using customer consent, the bank can establish creditworthiness by deploying models that look for UPI payments and other inputs like data from telecom companies." He highlighted that there are frictions on the UPI payments front, noting that "the lender bank does not have any clarity over where the money is going, but the receiver bank and third-party payments app facilitating the transaction have the data." The bank hopes to provide small business loans using these new data inputs to solve credit challenges for Bharat.
According to Business Standard reports, Tewari emphasized that 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. He stated that "They are too small, they are micro. And unless we solve for micro, this segment doesn't get solved." The use of digital transaction data could mark a significant shift in how banks assess small businesses, moving from balance-sheet-based financing towards cash-flow-based lending. As reported by The Economic Times, this new approach will help bring more businesses into the formal finance sector.
