State Bank of India (SBI) is developing a lending solution to use UPI transaction data as a proxy to assess a small business entity's creditworthiness in the absence of GST registration. 

For such borrowers, SBI can provide end-to-end digital loans within a day and bring them into formal finance, the state-owned lender’s managing director Ashwini Kumar Tewari.

"UPI can substitute GST (goods and services tax) if regular sales are happening through it. We are developing a UPI solution (for businesses) without GST. We will use that (UPI transactions) as a proxy for sales," Tewari said.

The bank has been able to solve lending challenges for the businesses registered with GST and is in a position to lend within ten minutes, he said, speaking at the annual Global Fintech Fest. 

The bank has disbursed Rs 1 lakh crore of such loans over the last 18 months using GST and PAN data, which gives an insight into the cash flow of a business, he added.

The task now is to frame automated lending to businesses outside the GST system using UPI transaction data and other payment behaviour, subject to customer consent, he said. 

Explaining "frictions" on the UPI payments front, he said the lender bank does not have any clarity over where the money is going, but the receiver bank and third-party payments app facilitating the transaction have the data. Using customer consent, the bank can establish creditworthiness by deploying models that look for UPI payments and other inputs like data from telecom companies, he said.

The bank hopes to provide small business loans using the new data inputs, Tewari said, adding that this will help solve the credit challenges for Bharat.