SBI to leverage UPI data for lending to unregistered small businesses

State Bank of India, the country's largest lender, is creating a new lending product that will harness UPI payment data to assess creditworthiness and extend loans to small businesses that operate outside the Goods and Services Tax framework.

The solution addresses a significant gap in the lending landscape, where many small enterprises—particularly in retail, services, and informal sectors—lack the formal documentation typically required for bank credit. By analyzing UPI transaction patterns as a proxy for business sales, SBI can evaluate the revenue flows and repayment capacity of these unregistered businesses.

The initiative reflects growing recognition among India's banking sector of the need to serve the vast informal economy. Approximately 40 million small businesses in India remain outside the GST net, limiting their access to formal credit facilities. UPI's ubiquitous presence has created a digital footprint that can serve as an alternative to traditional financial records.

SBI's move aligns with the broader regulatory push to increase financial inclusion and formalise India's informal economy incrementally. Rather than imposing GST registration as a prerequisite, the bank is adapting its assessment criteria to match the ground reality of how many small businesses operate, potentially unlocking credit access for millions of entrepreneurs currently underserved by the formal banking system.

The lender is among several financial institutions exploring alternative data sources—including mobile money trails, e-commerce platforms, and digital payments—to expand lending beyond traditional collateral and documentation requirements.