From UPSC perspective, the following things are important :
Prelims level : Open Credit Enablement Network (OCEN)
Mains level : Credit facilities for MSMEs
A new credit protocol infrastructure called the OCEN protocol is set to be launched very soon.
Practice question for mains:
Q. What is Open Credit Enablement Network (OCEN)? How it is expected to be a gamechanger in the micro-credit facilitation services in India?
Open Credit Enablement Network (OCEN)
- OCEN is a credit protocol infrastructure, which will mediate the interactions between loan service providers, usually fintech and mainstream lenders, including all large banks and NBFCs.
- It is developed by a think tank, Indian Software Products Industry Round Table (iSPIRT).
- With this, a credit will become more accessible for a large number of entrepreneurs and small businesses in the country.
- Private equity and venture capital players, angel investors, high net worth individuals and others also could be part of this exercise as investors.
How will it work?
- iSpirit is partnering with key leaders such as SBI, HDFC Bank Ltd., ICICI Bank Ltd., IDFC First Bank Ltd., Axis Bank Ltd. etc. for this new credit rail.
- Account Aggregators which will be using these APIs to embed credit offerings in their applications, and will be called ‘Loan Service Providers’, which will play a crucial role in democratizing access to credit, and lowering interest rates for customers.
Why need OCEN?
- The cost of lending being too high in India, small value loans becomes very unfeasible.
- OCEN which seeks to connect lenders to marketplaces and thereby to borrowers is a technology system.
- If implemented, the technology can democratize lending to micro-enterprises and street vendors in a big way.