Published Online:August 2026
Product Name:The IUP Journal of Bank Management
Product Type:Article
Product Code:IJBM030826
DOI:10.71329/IUPJBM/2026.25.3.44-57
Author Name:Sridhara G and Nagaraju R
Availability:YES
Subject/Domain:Finance
Download Format:PDF
Pages:44-57
India’s micro, small and medium enterprises (MSME) sector faces a persistent formal credit gap rooted in information opacity and bank data monopolies. This paper provides the first large-scale causal evidence on whether the Reserve Bank of India’s Account Aggregator (AA) framework, operationalized from September 2021, narrows this gap. Exploiting the staggered onboarding of banks as financial information providers (FIPs) between September 2021 and March 2023 as a natural experiment, a difference-indifferences design is applied to 214,836 loan applications from a leading Indian fintech MSME lender (2019-2024). AA eligibility raises loan approval probability by 4.1 percentage points (19% relative gain), lowers offered interest rates by 94 basis points, increases sanctioned amounts by 21%, and reduces nonperforming asset rates by 3.4 percentage points. Gains are roughly twice as large for Tier-2/Tier-3 city borrowers and first-generation entrepreneurs, and are amplified by complementarities with GST and UPI data, features unique to India’s digital public infrastructure. Instrumental variable estimates using bank-level API readiness confirm the causal interpretation. These findings offer robust evidence that consent-based data portability mandates can serve as effective instruments of financial inclusion in developing economies with thin credit bureau coverage.
Micro, small and medium enterprises (MSME) anchor India’s economy, contributing approximately 30% of GDP, 45% of exports, and employment for more than 110 million workers across 63.4 million enterprises (Ministry of MSME, 2023). Despite this macroeconomic weight, Indian MSMEs face a structurally entrenched credit gap estimated at $240 bn (International Finance Corporation [IFC], 2018).