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Home > Money > Personal Loans Last Updated: Mar 08th 2021

How Digital Financing is taking over Conventional?

When convenience takes the front seat in getting the finance and or financial decisions, conventional banking must take a back seat for sure. What we see today is a change that India has never seen before and is here to stay. Learn more on how Digital financing taking over the Conventional?

How digital financing is taking over conventional?

You must have got messages from your bank telling you that you are eligible for instant personal loans of such and such amount. Some would tell you that you can have a loan approved in 5 minutes and the loan disbursed to your account in 24 hours. Sounds too good to be true, but it is not.

In fact, getting a personal loan is now easier and faster than ever. The main reason behind this is the advent of digital technologies in finance. When a bank gives you any loan, it does a background check on you to see your details and particulars and whether you will be able to pay back the loan. Earlier, that process would take days, now it happens in a few minutes of time.

Here, it is important to understand how instant personal loans work. First, is the concept of KYC. Know Your Customer (KYC) helps a bank to identify you and verify your details.

Once a bank or a lending institution has your KYC information, it can determine your source of income and other required financial details.


Earlier, the KYC process would require submitting physical documents at a branch which would include the address proof, income proof, bank statement and so on. This would be a cumbersome process with long queues, filling up many documents and often waiting for weeks or even months to hear back from the bank.

But now the KYC process happens online in minutes and is known as - eKYC.

In e-KYC you do not have to submit your physical documents and can just scan and upload them online followed by an OTP-based verification of your identity. Banks and lending institutions have sophisticated software at their end to do the verification process, hence the KYC verification can happen almost instantly.

However, the e-KYC process has some limitations and is considered a half-KYC process. With the introduction of video KYC, full KYC is also possible digitally, but it is not a requirement for availing a personal loan.


All of us have been irritated by messages which ask us to link our Aadhaar to our bank account. However, that has made applying for a personal loan even easier. If your Aadhar is linked to your bank account, you just fill an online application form and give your Aadhaar number and upload some basic documents like address and income proof.

Since Aadhaar is linked to your PAN and bank account, the lending institution can verify all your details and disburse funds in your bank account in a day or two or even sooner.

Know more on Aadhaar PAN Linking

Pre-approved Personal Loan

Such loans are only given to select customers who already have a relationship with the bank. It requires very little documentation, as the bank already has the details of the customer.

Know more on How to apply for a Personal Loan?


Digital financing has made getting a personal loan much easier. However, a word of caution - go for a personal loan only if you really need one.

Disclaimer: This article provides an overview and general guidance, not exhaustive for brevity. Please refer Income Tax Act, GST Act, Companies Act and other tax compliance acts, Rules, and Notifications for details.