Simranjeet Singh
India’s financial landscape has witnessed a remarkable transformation in recent times particularly in the last decade, emerging as a global leader in digital innovation. This progress has been fuelled by government initiatives such as Aadhaar, UPI, Digital India, and the development of India’s Digital Public Infrastructure (DPI). By harnessing advanced technologies, government-led programs, and active private sector participation, the country has firmly established itself as a pioneer in digital finance.
It is well known that our country’s digital public infrastructure (DPI) has garnered global recognition, with transformative initiatives such as FASTag, PM GatiShakti, Jan Dhan, Aadhaar, Mobile (JAM), and Unified Payments Interface (UPI). Along with this infra, digital payments and credit platforms have empowered Micro, Small, and Medium Enterprises (MSMEs), which contribute 30% to India’s GDP.
Coming to the Permanent Account Number (PAN), it is indeed a cornerstone of India’s financial framework and has historically facilitated tax compliance and identification. With PAN 2.0, India takes a leap forward, integrating the legacy system into a cutting-edge, digitally enabled ecosystem designed to meet modern financial and operational challenges. With PAN 2.0, the traditional version of the Permanent Account Number system will be upgraded by incorporating advanced features to enhance security, efficiency, and compliance.
This upgrade has innumerable benefits to multiple sectors in the economy including the BFSI sector. It is particularly important for financial institutions as it improves the management and monitoring of financial transactions.
Some of the key benefits of the initiative overall are real-time verification which enables instant validation of financial credentials, reducing delays in processes like onboarding and lending, encrypted QR codes to enhance security by making PAN data tamper-proof and ensuring authenticity, provides a unified compliance interface which simplifies regulatory requirements by integrating with tax platforms and other financial systems. This will also enable the digital architecture to align with international best practices, promoting interoperability and future-proofing the system.
More importantly, in my view, since Banks and NBFC rely heavily on PAN for authentication, database monitoring, fraud check and credit underwriting processes, this single system will streamline integrations and ensure reliable verification of PAN credentials, enhancing the overall credit ecosystem. This move will help entire BFSI space and other businesses for faster processing and fraud prevention while streamlining operations.
Narrowing down further specifically to the banking & lending institutions, the introduction of PAN 2.0 will bring significant improvements to the way financial and lending institutions operate. By providing an enhanced, secure, and more efficient way of managing and verifying customer data, PAN 2.0 offers various benefits to lending institutions. These benefits help improve customer experience, mitigate risk, enhance compliance, and streamline operations.
The overall journey of the customer from Login to underwriting to disbursal stands to improve both for the customer as well as the financial institution. Some of the key transformative benefits of PAN 2.0 initiative of the Government of India are:
Enhanced customer identity verification
PAN 2.0 provides more accurate and secure customer identity verification. With its improved database and real-time validation, lending institutions can instantly verify the identity of borrowers and ensure they are not involved in fraudulent activities. This reduces the risk of lending to individuals using fake or multiple PAN numbers, ensuring a secure and reliable customer database.
Along with enhanced customer identity, PAN 2.0 will also help lending institutions in improving accuracy and verification processes which will drastically reduce the risk of fraudulent loan applications. Since PAN 2.0 includes features like real-time validation and more stringent checks, lending institutions can prevent individuals from using fake or duplicate PAN numbers to apply for loans. This is a key benefit for mitigating risks associated with fraudulent activities, especially in the unsecured lending space.
It goes without saying that in lending, TAT plays a crucial role in the overall experience of the customer as well as the other intermediaries like the channel partners. By streamlining the verification process, lending institutions can quickly authenticate a borrower’s PAN details and associated financial data. This leads to faster loan approvals, quicker disbursement of funds, and a smoother overall borrowing experience for customers.
As we are in the business of lending money, risk management is very critical to the overall behaviour of the portfolio. With PAN 2.0 coming in, credit risk assessment will be better performed. With improved data accuracy and access to a more comprehensive set of customer financial information (such as income, tax filings, and loan history), lenders would be better placed to evaluate the creditworthiness of an individual or business more effectively allowing for better-informed lending decisions and reducing the likelihood of a default.
In the event of a loan recovery especially when dealing with non-performing assets (NPAs), lending institutions often face challenges. PAN 2.0 will aid in the collection and recovery process by ensuring that all borrower information is accurate and up to date. This will facilitate better tracking of defaulters and allow institutions to take necessary actions for loan recovery in a more systematic and transparent manner.
Last but certainly not the least, like in every other sphere of the economy, in lending space as well, tech is the way forward. As the demand for digital lending services continues to grow, PAN 2.0 will play a key role in enabling digital lending platforms to operate efficiently. The integration of PAN 2.0 with digital platforms will ensure that online loan applications are verified quickly and accurately, facilitating faster loan approvals and disbursements.
To summarise, PAN 2.0 is more than a technological upgrade—it is a strategic tool that positions India’s financial ecosystem for the future. By embracing PAN 2.0, banking and lending institutions will be able to operate with greater confidence, efficiency, and security, while businesses can unlock new opportunities for growth and innovation.
As we move forward, it is essential for stakeholders across industries to recognize the transformative potential of PAN 2.0 and integrate it into their operations. This system not only addresses the challenges of today but also lays the foundation for a robust, secure, and inclusive financial landscape for the future.
With PAN 2.0, we look forward to the upgrade and its related benefits in our overall customer experience in days to come.
