Hi everyone,  

Welcome to the 141st edition of The Pattern, a weekly where we dive into the latest from the world of economy, technology and finance. Let’s get started. 

A monopoly comes to an end.  

For decades, public sector banks (PSBs) had a monopoly over a piece of critical financial intelligence. It gave them an upper hand in borrower assessment and risk management. Private lenders, on the other hand, had to rely on credit bureaus and financial statements. These methods often lacked depth and real-time insights. But the game has changed. 

Recently, we witnessed a landmark decision. Now, private lenders and All-India Financial Institutions (AIFIs) like NaBFID have access to Central Economic Intelligence Bureau (CEIB) data, breaking the PSB monopoly on borrower intelligence. This access levels the playing field, allowing private banks to verify borrower history, detect fraud, and reduce bad loan risks before sanctioning or renewing loans.  But does this mean the end of all the woes for a very nervous banking sector? Not really. Information, it turns out, is only one of the many ingredients for a successful credit business.  

Role of FinTech  

To understand this, we need to see how fintechs have helped private lenders. Since the availability of data was restricted, the private sector had to rely heavily on traditional methods for loan verification and risk assessment, such as credit bureau reports, financial statements, and transaction data. That's why many private banks have partnered with fintech companies to enhance their data analytics and credit assessment capabilities. They offered solutions utilising alternative data sources and advanced analytics to assess borrower creditworthiness.  

Now, private banks will have direct access to the data. Not just that, CEIB has proved to have a stronger firewall against NPAs. The government has already seen success in public sector banks, where the  Gross Non-Performing Asset (GNPA) ratio for large borrowers fell from 4.5% in March 2023 to 2.4% in September 2024. PSBs also posted their highest-ever net profit of ₹1.41 lakh crore in FY 2023-24. 

On paper, this sounds like a recipe for financial stability. But here's the catch—these numbers primarily reflect PSBs. Private sector banks, particularly Small Finance Banks (SFBs), still grapple with rising asset quality stress, high exposure to unsecured loans, and microfinance sector strain. 

Minding the gap  

Here is the catch. CEIB's data helps at the approval stage, but what happens after the loan is disbursed? This is where deeper intelligence, technology interventions and FinTech enablers step in. Despite better pre-loan verification, NPAs remain a problem because: 

• High exposure to unsecured loans – Some SFBs have  50-55% of their portfolio in unsecured loans, making them vulnerable to defaults. 

• Microfinance sector stress – Many SFBs serve small borrowers with fluctuating incomes, increasing delinquency risks. 

Lack of real-time borrower insights – CEIB data is static, while FinTechs offer dynamic credit monitoring. The business of lending is ultimately a business of collections but even that is under a bit of a stress right now as the RBI recently introduced new norms that put guardrails in ways that lenders can use commercial numbers to make collections calls.   

According to the mandate on collection calls via 160 series , lenders can no longer use rotating mobile numbers to chase defaulters, significantly reducing pickup rates. Lower call pickups mean higher collection costs, increased loss rates, and stricter lending policies. CEIB may give banks a better first filter, but it does not solve the collections crisis. Fintechs have already recognised this shift and are moving beyond outdated recovery methods. That's why fintech still matters. 

• Credit monitoring – Fintechs track borrower spending patterns, alternate cash flows, and digital footprints to flag early warning signs before a loan turns into an NPA. 

• Digital-first engagement – Collection calls are losing effectiveness, but fintechs can leverage WhatsApp nudges, in-app notifications, and AI-driven repayment reminders to boost recoveries. 

Final word  

So, where does this leave us?  

Opening up of more data sources is definitely good for banks and not really a threat to the risk intelligence platforms.  

Private lenders will now use CEIB data for better initial risk screening. Fintechs can help them refine risk models and early warning systems, improve borrower engagement, and drive smarter collections. The real winners will be those who leverage both rather than relying solely on pre-disbursal intelligence. 

CEIB access is undoubtedly a step forward, but it's not a silver bullet for India's NPA and collections problem. Just as a ship needs both a radar (CEIB) and an experienced captain (fintech solutions) to avoid disasters, lenders must integrate real-time credit monitoring and digital-first collections to tackle the root causes of NPAs. 

To dive deeper into how fintech is evolving and shaping the future of lending, we’re thrilled to announce that FinBox is launching its Partnership Lending Stack —a full-suite solution designed to help platforms introduce embedded lending products in weeks, not months.  

Catch us at the  Bharat FinTech Summit  to learn how we’re revolutionising digital lending.  

Until then, stay tuned—the Budget 2025-2026 is just around the corner. Keep an eye on the latest fintech trends and policy changes that will shape the industry’s future. Stay updated! 

Reading List:  

1. AI in Banking: Revolution or risk? Economic Survey 2024 warns of the fine line ahead  

2. RBI expresses concerns over small finance banks: Mergers suggested to mitigate risks  

3. Cred joins RBI's digital currency project; first fintech to give access to CBDC  

4. UPI dominates digital payments, sees explosive growth over five years  

Thank you for reading. If you liked this edition, forward it to your friends, peers, and colleagues. You can also connect with me on Twitter here and follow FinBox on LinkedIn to always get all updates. 

Cheers, 

Mayank  

All opinions expressed are my own and do not necessarily reflect the views of FinBox or its promoters.