COVID-19 has caused serious disruptions to the Indian economy, but there are some positives that have also come out of it.
COVID-19 and the consequent lockdown have certainly accelerated the pace of digital transformation in India. As people continue to stay at home and work remotely, the need for businesses to go digital and align their existing operations with the new normal has become critical.
The digital transition caused by the unprecedented pandemic is now visible across sectors – be it banks, grocery/food delivery, or e-commerce. Realty is no different. The idea is to minimize physical interactions and avoid the usage of common touchpoints, thus preventing all stakeholders from the exposure to the pandemic threat.
How these solutions are safeguarding the interest of homebuyers and enabling them to continue the home buying process despite the lockdown? Traditionally, the process has been laced with piles and piles of paperwork. Let’s read further for a better understanding of the topic.
While banks and ATMs have remained active throughout the lockdown, most financial institutions are now resorting to online to enable the customers.
Among the several laudable government initiatives, the one-year extension of the Credit Linked Subsidy Scheme (CLSS) up to March 2021 is a commendable move that will bring abundant benefits to middle-income group, i.e. people earning between Rs 6 lakh and Rs 18 lakh per annum. These people will now be eligible for receiving an upfront interest subsidy of up to Rs 2.35 lakh on their approved home loan for yet another year.
Digital Adoption in the Banking and Finance Sector
We have already seen the rise of fintech solutions and how it has boosted financial inclusion across India by giving the digitally uninitiated citizens access to various financial instruments. However, since the onboarding process for these platforms had been affected by the lockdown, people were unable to lend money and use other financial instruments to meet their needs.
In a bid to address this challenge, the Reserve Bank of India (RBI) has recently introduced video KYC as an alternate digital solution to continue the customer on-boarding process. This process will now enable bank officials to verify the customer’s identity using Aadhaar or PAN card in a digital setting. It doesn’t call for any physical meeting and does not require physical handling of photocopied documents.
This could be a major boost for banking and lending institutions, digital payment aggregators, non-banking financial institutions (NBFCs), and insurance and financial securities to keep the ball rolling. Eventually, a digital makeover would prove to be a boon for borrowers seeking home loans to finalise their homebuying decisions.
On the lending front, several banks have started sanctioning loans to customers online by enabling them to sign the agreement and upload documents through their mobile phones or other digital mediums.
Another challenge faced by various financial institutions other than banks is that they still need to follow the offline Aadhaar authentication for completing the KYC process. Not only does this increase their operational costs, but it also hampers their aim to go completely digital. Addressing this challenge would, therefore, make the process seamless for both parties.
The need for a policy framework
Although the aforementioned initiatives have given a great impetus, some corrective measures could also be incorporated. For instance, at present, one can apply for a loan as high as Rs 60,000 through e-KYC. If the RBI raises this limit, it could give people access to small loans and help them continue their livelihood. Likewise, it is also essential to make credit card issuance possible through a digital process, i.e. via OTP-based e-KYC. People can thus apply for credit cards digitally and receive them at their doorstep.
Another challenge faced by various financial institutions other than banks is that they still need to follow the offline Aadhaar authentication for completing the KYC process. Not only does this increase their operational costs, but it also hampers their aim to go completely digital. Addressing this challenge would, therefore, make the process seamless for both parties
For simplifying this process further, the government can also create interoperability of KYC records between financial institutions by leveraging Central KYC (C-KYC). Doing so will allow service providers smooth access to the database at the time of new account openings. This will add speed to the current KYC process and also help in cutting down time and cost for both the parties.
The Future Roadmap
COVID-19 has caused serious disruptions to the Indian economy, but there are some positives that have also come out of it. However, with proactive government initiatives that promote contactless financing during the present days, economy will bounce back and in fact, grow in the post-COVID world.
These positive developments – mainly in the banking and finance space – will significantly help the realty sector revive and help buyers to continue their home buying process. Most importantly, it will put fence-sitters in a better position to invest in properties as procuring loans and long drawn processes will not be a challenge, thus enabling them to make buying decisions securely and efficiently, even during uncertainties such as the present one.
(By Saurabh Garg, Co-founder & Chief Business Officer of NoBroker.com)