India’s next credit reform |
By Arvind Gupta & Saravanan Nattanmai
India’s Digital Public Infrastructure (DPI) has already delivered one of the most consequential financial inclusion stories of the past decade. Aadhaar-enabled know-your-customer (KYC), instant retail payments through United Payments Interface (UPI), and consent-based data sharing via the Account Aggregator framework have brought hundreds of millions into the formal financial system, reduced onboarding and transaction costs, and made financial information portable across institutions. This data layer marked the first step in financing at a population scale. It enabled access, bank accounts, and digital visibility. But inclusion through data and payments, while necessary, is not sufficient to unlock credit at depth. The next constraint lies in how financial assets and cash flows are represented, enforced, and mobilised. Tokenisation, or the digital representation of ownership rights and financial claims on a programmable ledger, addresses this gap. It is sequential to DPI, not parallel to it. Where DPI digitises information, tokenisation digitises rights, opening the door to programmable, fractional, and reusable financial value.
According to World Bank data, India’s domestic credit by banks to the private sector has remained at around 50% of GDP, far below the levels seen in economies with deeper credit markets, underscoring a persistent structural gap between economic activity and credit availability across both retail and business segments. Only about 19% of micro, small, and medium (MSME) credit demand in FY21 is currently met........