The digital credit revolution: Banks, DPI and road to inclusive growth

India’s aspiration to become a developed economy by 2047 – Viksit Bharat – is anchored in the goal of achieving a USD 30 trillion GDP and a USD 26,000 per capita income by the centenary of its independence. Policy scenarios suggest the economy would need to sustain growth of roughly 8–10% annually over the next two decades to meet this target. Current projections point to growth of about 6–7%. By contrast, China achieved several years of very high growth – often around 9% or more – during the decades following its economic reforms, and Vietnam has averaged roughly 6.3–7% over the last two decades. Narrowing this gap with such benchmarks will be essential if India is to stay competitive.

To bridge this gap, India must unlock growth across four foundational pillars: Technology, Capital, Entrepreneurship, and Formalization. Among these, the role of MSMEs and agriculture is pivotal not just because they employ nearly half of India’s workforce, but because they represent the core of inclusive and grassroots-led development. Yet, their contribution to GDP, 30% from MSMEs and just 18% from agriculture, reveals a significant productivity gap. Addressing this gap through targeted financial innovation and ecosystem support is essential for realizing the Viksit Bharat vision.

Addressing Key Challenges

Two of the biggest challenges hampering the growth of India’s small businesses and farmers limited market access and restricted access to credit. MSME capital gap: India’s MSME sector faces a credit gap of around USD 240–300 billion, with nearly half of credit demand unmet and only 14% accessing formal finance. A big reason for this is that many small businesses cannot furnish the required documentation.

Agriculture credit gap: The proportion of farmers availing credit schemes is just 28 percent, despite 58% being aware - largely due to collateral hurdles and procedural complexity. 

Banks in India have also long faced structural hurdles in profitably serving MSMEs and the agricultural sector. High customer acquisition costs, limited access to reliable financial data, and the informal nature of cash flows have made credit underwriting complex and risk-laden. Industry interviews suggest first-time acquisition costs for MSME lending often fall in the 10-12% range. Digital, contactless, paperless and cashless infrastructure, supported by DPI, has the potential to substantially reduce these costs while improving controls. 

Strategic Shift: From Transactional to Ecosystem Enablers

To unlock the full potential of these underserved segments, banks must evolve from being mere credit providers to ecosystem enablers. This requires a shift towards data-driven, tech-enabled, and platform-integrated models that reduce the cost-to-serve, enhance customer experience, and build long-term trust.

Three Strategic Opportunities for Banks

1. Leveraging India’s Digital Public Infrastructure (DPI)

India’s DPI stack offers a transformative foundation for inclusive financial services, giving banks powerful tools to close long-standing gaps in access, affordability, and trust. Account Aggregators (AA), while gaining traction in personal loans, remain underutilized in business lending; scaling their use can unlock collateral-free, cash-flow-based credit for millions of MSMEs. Online credit marketplaces such as RXIL already facilitate invoice discounting and working-capital access, and banks can partner with or embed into these platforms to extend reach while reducing acquisition costs. Verified digital land titles through land record digitisation and tokenisation are making farmer collateralisation viable, opening the door for innovative, asset-backed credit products. At the same time, streamlined digital KYC and scheme onboarding—for instance, for Kisan Credit Cards—can accelerate rural inclusion and remove friction for underserved customers.

2. Embedding into Marketplaces and Sector Platforms

Digital platforms are reshaping how MSMEs and farmers access markets, creating new avenues for banks to integrate financial services directly into the flow of commerce. E-commerce marketplaces such as Meesho  connects millions of small sellers to national buyers, and banks can embed credit and payment solutions within these ecosystems to deliver seamless financial access at the point of need. Sector-specific platforms like 91Trucks for vehicle financing and eNAM for agricultural trade present similar opportunities for contextual financial products aligned with platform-specific requirements. Beyond transactions, banks can also use these platforms to enable entrepreneurship, especially among women and youth, by linking mentorship with credit and using DPI data to identify and support nano-entrepreneurs.

3. Building a Tech-Driven, Agile Banking Architecture

To serve MSME and agricultural segments effectively, banks need to invest in modern technology stacks that go beyond incremental upgrades. Advanced AI and natural-language-processing tools can deliver hyperlocal insights such as weather forecasts, market prices, and financial-literacy content in regional languages, deepening advisory-led engagement. Cloud-native, API-driven architectures provide the agility, scalability and speed required to launch tailored products, integrate seamlessly with third-party platforms, and respond quickly to evolving customer needs. At the same time, AI and analytics strengthen resilience and risk management by enabling banks to predict climate risks, detect early signs of borrower distress and manage dynamic loan lifecycles with greater precision.

The Way Forward: Banking Imperatives 

To unlock their full potential in MSME and agricultural lending, Indian banks must go beyond traditional practices and fully leverage digital public infrastructure. This means using GST and cash-flow data by encouraging MSME GSTN registration to enable digital, cash-flow-based credit scoring; adopting open frameworks such as OCEN and the Unified Lending Interface (ULI) to streamline data exchange and deliver tailored, faster credit; and embedding finance directly into digital B2B and agri-marketplaces to offer invoice discounting, flexible loans, and value-added services. 

Banks should also harness DPI and asset tokenisation to convert informal physical assets into credit-worthy digital records, expanding underwriting potential, while providing multilingual, voice-enabled AI assistance in local languages to share real-time market information, weather alerts, and financial literacy content. Finally, to unlock capital for diverse borrower profiles, banks can explore alternative credit models such as co-lending with NBFCs and fintechs, revenue-based and invoice-backed financing, and agri-fintech partnerships.

Financial institutions must also evolve from being lenders to strategic partners and ecosystem orchestrators. With government-backed infrastructure in place, Indian banks can leverage AI, analytics and risk management solutions to unlock granular insights into MSME and farmer cash flows, enable more accurate credit scoring and underwriting, and facilitate dynamic loan lifecycle management.

The opportunity is clear: by aligning banking innovation with national priorities, Indian financial institutions can turn small lending steps into giant leaps for a Viksit Bharat 2047.

Rajashekara V. Maiya

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Rajashekara V. Maiya is VP and Global Head of Business Consulting at Infosys Finacle.