Banks may soon use details from your digital footprint to give home loans, here's how

Banks are working on a new framework to give home loans using a person's spending patterns, mirroring the policy for MSME loans as seen in the Union Budget 2024

The Finance Ministry is developing a new model to provide home loans based on a person's consumption and spending pattern, Indian Express reported, quoting Financial Services Secretary Vivek Joshi. Banks will be developing the framework mostly on their own, but some of the parameters are to be discussed with the Indian Banks' Association.

Banks will consider consumption or spending patterns of individuals while making their credit assessment (iStock/Hindustan Times Archive)

How are home loans currently given and why is the new change being brought in?

"As of now, home loans from banks are available only to those who are salaried or are a tax returnee," Joshi told The Indian Express in an interview. "For those who don’t have it (required documents), banks can lend to them (under the new model) seeing their digital footprints.”

The new method of assessment is therefore, aimed at individuals applying for home loans whose creditworthiness is not that easy to determine due to factors such as a lack of documents used traditionally for granting home loans.

How is the new model of credit assessment connected with MSMEs?

The Union Budget 2024 presented by Finance Minister Nirmala Sitharaman on July 23 had announced a similar new credit assessment model for Micro, Small & Medium Enterprises (MSMEs), where banks will assess them based on their digital footprints and not on their balance sheets.

What are the components of the digital footprint that is taken into account?

The components of the digital footprint includes salary payments, electricity bills, municipal taxes, GST and provident fund details, according to a Times of India report, which added that bank accounts by themselves can give a lot of information about a borrower.