Reserve Bank Governor Shaktikanta Das on Wednesday advised banks to focus on cash-flow based lending in order to improve access to credit and cost of credit. “To improve the credit to GDP ratio, access to credit and cost of credit need to be addressed by lesser reliance on collateral security and greater cash-flow based lending,” Das said. Credit bureaus and the proposed Public Credit Registry (PCR) framework are expected to improve the flow of credit as well as credit culture, he said while addressing a webinar organised by NCAER. Das’ comments come at a time when Indian banks now rely mostly on collateral-based loans and personal guarantees. Among all the prerequisites for achieving demographic dividend and accelerated growth, quality of human resources, greater formalisation of economy, a higher credit to GDP ratio and greater financial inclusion are the differentiating factors that will elevate our economy to the desired level, Das said.
