I am sitting in a rural branch of a microfinance institution (MFI) in Tamil Nadu, listening to a woman explain why no bank will lend to her. She runs a spice trading business that has been in operation for 18 years. She moves 50 tonnes of spices annually and knows all her suppliers by name. Yet, she has no GST records, no collateral, and no formal credit score. The commercial banks won’t touch her. The non-banking financial companies (NBFCs) want 24% interest. The MFI has stopped lending above ₹50,000.
This conversation repeats itself thousands of times across Tier 3–6 pockets in India. We cannot solve this problem simply by making the last mile shorter. We solve it by redesigning what happens before the journey even begins.
The Inclusion Paradox
India has built impressive endpoints: over 500 million Jan Dhan accounts, more than 1.3 billion Aadhaar enrollments, and rapidly rising mobile penetration. But dig deeper, and you hit a wall.
Many of these accounts remain dormant. The digital IDs do not automatically unlock credit, and the smartphones are not seamlessly connected to capital. The real economy – spanning agriculture, trade, and services – still runs primarily on cash and trust. We have built the endpoints, but we have yet to build the underlying backbone.
What Digital Public Infrastructure Actually Is
Digital Public Infrastructure (DPI) is not just a website or an app; it is the plumbing. It represents the rails and the common language that allow lenders, borrowers, and intermediaries to communicate with each other without building custom, proprietary bridges every time.
Think of India’s power grid: it does not care whether your appliance is manufactured by Philips or Bajaj. Universal standards allow the entire ecosystem to flourish independently.
Rural lending currently lacks these standards. NBFCs, business correspondents (BCs), MFIs, and commercial banks all serve the same pool of borrowers, yet they cannot seamlessly share data. They cannot cross-reference credit histories, leaving them blind to a borrower’s full credit footprint.
Three Layers That Need to Stack
- First: Data Standards. The spice trader’s credit story is currently scattered across fragmented institutions. One lender sees a historical default; another sees full, timely repayment. A new lender sees nothing at all, forcing them to either over-collateralize the loan or price the borrower out entirely. We need a common, standardized credit-event reporting layer that lenders can query without compromising borrower confidentiality.
- Second: Open APIs. BCs and grassroots organizations are the lifelines to remote geographies, yet they remain lack resources and technology. Imagine a BC logging into a unified dashboard, checking a borrower’s eligibility across multiple lenders in real time, and originating a loan within hours. BCs would transform from captive agents into true financial intermediaries, and borrowers would be served significantly faster.
- Third: Embedded Workflows. We must stop requiring rural traders to visit a physical bank to access credit. Instead, we should embed credit directly into her ordering app, her supplier platform, or her inventory tools. Credit ceases to be a product you actively seek; it becomes an invisible feature that is available exactly when needed, giving lenders real-time visibility into the business’s actual cash flows.
Why Lenders Haven’t Built This Yet
The benefits of this infrastructure are diffuse, while the upfront costs are heavy. Furthermore, data is traditionally viewed as a competitive moat. Why would a lender share borrower intelligence with a BC who might just offer better rates from a rival institution?
The ecosystem is also highly fragmented, comprising over 1,000 NBFCs, 5,000 MFIs, and more than 80,000 BCs. Coordinating them is a monumental task. However, these challenges are not reasons to wait. Rather, they are the exact reasons why this transition must be regulator-led, government-backed, or driven by consortiums large enough to absorb the first-mover costs.
The Path Forward
- Start with BC Standardization: Empower BC with capital and technology. Allow them to maintain a unified portfolio, originate loans across multiple financial institutions, and be compensated based on outcomes.
- Build Embedded Finance for High-Volume Sectors First: Focus initially on agriculture, trade, and SME services. Integrate lending mechanisms directly into procurement platforms, e-commerce networks, and supply chains to make credit seamless and invisible to the end borrower.
- Create Regional Credit Registries: Establish cross-lender credit registries by region and segment. This collective data can train specialized AI models tailored to rural India, with the insights shared back among all participating institutions.
The 2030 Vision
By 2030, our spice trader will not have to think about the mechanics of credit anymore. It will be seamlessly embedded into her daily workflow. When she needs capital to scale, multiple lenders will bid competitively for her business in the background. She will repay on time because the mechanism is convenient.
Lenders will cut their origination costs by up to 70%. BCs will thrive as independent micro-entrepreneurs earning across multiple institutions. Financial data, now standardized and fully interoperable, will fuel AI models purpose-built for India’s informal economy. This is not about inventing something entirely new; it is about rebuilding our old financial infrastructure for the 21st century.
We already possess the necessary pieces: Aadhaar, Jan Dhan, UPI, over 2,000 fintech companies, forward-thinking regulators, and millions of borrowers eager to go digital. What we are missing is not technology or capital. It is the infrastructure that ties them together.
Building this does not happen at startup speed. It requires deliberate coalition-building, regulatory patience, and deep investment in the backend systems that nobody sees, but everyone depends on.
That is the true play for BFSI 2030. Not just perfecting the last mile, but building the backbone.
Views expressed by: T. M. Durai, Founder & CEO, Agilio Capital Private Limited
