Tech can revolutionize priority sector lending in housing: Atul Monga, BASIC Home Loan

Financial institutions have always struggled to achieve ir priority sector lending (PSL) targets. Under obligation from central bank, financial institutions end up fulfilling PSL targets through secondary markets.

Reserve Bank of India (RBI) defines priority sectors as agriculture, MSME, micro-credit, education, housing, export credit, and weaker sections. Republic caught up with BASIC Home Loan founder & CEO, Atul Monga to understand trends in priority sector lending for housing in India, how technology is solving problem, and what BASIC is doing to ease burden of Financial Institutions.

1. What have been your 3-5 key observations of priority sector lending for housing in India, from Consumer, Technology & Lenders perspective?

Financial institutions face challenges in achieving ir priority sector targets for housing due to various factors.

Firstly, most lenders have opted a limited and selective criterion for eligibility, reby excluding a large group of consumers from credit access. Secondly, process of acquiring a loan can be rar tedious as re is a lack of uniform submission of offer documents and or information.

Also, inequate technological infrastructure and a lack of digital connectivity have resulted in operational inefficiencies. Hence re is a need for more cost-effective and timely loan disbursal and servicing solutions.

2. Can you share more about your role in whole process of priority sector lending for housing sector? How does it work? How Banks/FIs benefit by working with you?

Affordable housing in India has been neglected by ecosystem players and banks, despite being a mandated priority sector for lending by RBI. current technology development in home loans is limited to web aggregators who generate les without providing fulfillment support, mainly focusing on tier-1 cities.

We recognized opportunity and leveraged ir experience in e-commerce logistics and technology to dress automation and tracking challenges in this sector. Mortgages, especially for affordable housing, remain a largely untapped market with high lending rates ranging from 18% to 25%. However, default rates are low due to social importance of homes in low to middle-income groups and NPAs are low at usually <1% for most players.

BASIC aims to simplify and expedite home loan process for middle- and low-income groups through a "Phygital" approach, combining personalized assistance from experienced agents with digital tools.

By offering services that facilitate faster loan processing and reducing manual intervention, BASIC supports banks and financial institutions in meeting ir targets while providing better products and transparency to customers.

3. Why do FIs lag in achieving ir priority sector targets for housing sector? What ails m?

Financial institutions (FIs) face challenges in meeting ir priority sector targets for housing due to inequate regulatory guidelines and funding. absence of clear directives hinders ir ability to effectively allocate resources and cater to housing needs of priority sector.

Furrmore, lending to priority housing sector poses risks for FIs, as many borrowers have poor credit histories. This increases likelihood of defaults, making it challenging for FIs to recover loans in event of a default.

4. What are trends you see in this space over next 2-3 years? Can technology be disruptor?

We believe that technology has potential to revolutionize priority sector lending in housing sector. Through automation of loan processes and utilization of data analytics, loans can be disbursed efficiently and in a timely manner, while also improving overall customer experience. ditionally, re is a grual shift in industry towards digital solutions for loan marketing and acquisitions.

This transition to digital platforms and technologies facilitates greater accessibility and effectiveness in reaching out to borrowers. By leveraging technology, priority sector lending can be transformed, offering cost-efficient operations and enhanced customer experiences.

5. How can priority sector lending be transformed for housing sector? Do you believe limit for priority sector lending for housing sector needs to be revised? If yes, what's your argument for it, and how do you think it will help India & consumers?

Transforming priority sector lending in housing sector requires key initiatives. First, digitalizing processes would allow lenders to access information quickly and accurately. Second, establishing a secure central database would store customer information and enable its accessibility for lenders. Third, introducing innovative financial products with flexible loan terms and non-tritional repayment structures would enhance lending options.

ditionally, improving outreach programs would raise awareness and expand customer base. Lastly, revising limit for priority sector lending would make it more accessible, driving increased credit and reducing cost for housing sector, reby benefiting India's economy.

6. Can you share what's social impact BASIC has created through priority sector lending for housing in India?

BASIC has me a significant positive social impact through its priority sector lending for housing sector. By providing access to credit for underserved segments of population, BASIC has enabled individuals and families to fulfill ir dream of owning a home.

We have also worked towards reducing turnaround time for credit approval, ensuring that borrowers can receive timely financial assistance. Moreover, BASIC offers more flexible loan terms, tailoring m to suit specific needs and financial capabilities of borrowers. Thus, BASIC has empowered customers and improved ir standard of living.