India's New Lending System: A Double-Edged Sword

• The Reserve Bank of India plans to expand the unified payments interface to include lending, promising a unified lending interface soon.
• This new system aims to help farmers and small businesses access credit more easily, leveraging digital public infrastructure.
• While this could boost financial inclusion, there are concerns about increased household debt, with net household savings at a 47-year low.
• The formal banking system's conservative lending practices and the private sector's reluctance to lend to high-risk borrowers complicate the issue.
• The government must carefully monitor the new system to avoid unintended consequences, such as unsustainable household borrowing patterns.

Source: Bloomberg