The smart finance system Telangana wants to introduce also relies on documenting credit repayment capability.
| Photo Credit: M. VENKAT RAO
Telangana Government is focussing on transition of the existing microfinance system to smart finance — an ecosystem emphasising transparency, responsible credit and repayment data-driven lending.
The State envisions a transparent, inclusive and innovation led financial ecosystem that transforms self help groups (SHG) and joint liability groups (JLG) into gateways for individual credit empowerment, women led entrepreneurship and long term wealth creation anchoring Telangana’s rise as the country’s most financially inclusive state, according to the Telangana Rising Vision-2047 document.
68% households access formal credit
With nearly 68% households in Telangana accessing formal credit and a credit-deposit ratio among the highest in India, the State laid a strong foundation for deepening household level financial empowerment.
Network of 6.1 lakh SHGs
The State’s extensive network of around 6.1 lakh SHGs has built financial discipline and savings culture. Yet its collective lending model presents an opportunity of shifting focus towards correcting capital misallocation by formalising repayment histories and integrating them into mainstream credit bureaus to unlock individual credit potential.
Collateral-based to relationship-based
With 75% of the households holding gold as savings instrument, which some show as collateral, the State aims to move from collateral-based borrowing towards relationship-based lending ensuring resilience, flexibility and asset security. Some of the key initiatives in this direction will include formalising repayment behaviour of SHG members and enable them to access affordable individual credit from formal financial institutions replacing high cost microfinance and informal borrowing.
The State will deploy a unified digital platform linking SHG level individual accounts to enable real time, cashless transactions and automated documentation. Trained NGO/volunteer networks will support adoption in this direction and repayment history of upto ten years would be digitised to establish credible and individual credit trails.
In the process, the State will require SHG repayment records to be transmitted to credit bureaus with equal weightage to formal loan data. The State Rural Livelihoods Mission will operate as middleware to validate and synchronise data enabling banks and NBFCs to offer larger, lower interest individual credit products. The State will take steps to expand SHGs into full service financial access hubs offering deposits, pensions, insurance and education/housing finance in partnership with SIDBI Swavalambana Kendras. A digital “master-sell” marketplace will provide livelihood safety nets while youth engagement programmes will ensure sustained digital adoption.
Published – December 11, 2025 05:05 pm IST
