GS Paper - III
Reserve Bank of India (RBI) Governor Shaktikanta Das on 26 August 2024 said that a nationwide launch of the Unified Lending Interface (ULI) will happen in due course.
Similar to Unified Payment Interface (UPI), which has revolutionised the retail payment system in the country, ULI will transform the lending landscape.
What has RBI Governor announced?
ü In August last year, the RBI launched a pilot project for a public tech platform for frictionless credit, as announced.
ü It is aimed to bring about efficiency in the lending process in terms of reduction of costs, quicker disbursement, and scalability.
ü The RBI Governor on 26 August 2024 proposed to call the tech platform for frictionless credit as Unified Lending Interface (ULI).
ü He said just like UPI transformed the payments ecosystem, he expects that ULI will play a similar role in transforming the lending space in the country.
What is Unified Lending Interface?
ü With rapid progress in digitalisation, India has embraced the concept of digital public infrastructure which encourages banks, NBFCs, fintech companies and start-ups to create and provide innovative solutions in payments, credit, and other financial activities.
ü For digital credit delivery, the data required for credit appraisal are available with different entities like Central and State governments, account aggregators, banks, credit information companies and digital identity authorities.
ü However, these data sets are in separate systems, creating hindrance in frictionless and timely delivery of rule-based lending.
ü The RBI Governor said that ULI platform will facilitate a seamless and consent-based flow of digital information, including land records of various states, from multiple data service providers to lenders.
ü It will cut down the time taken for credit appraisal, especially for smaller and rural borrowers.
ü He said that the ULI architecture has common and standardised APIs (Application Programming Interface), designed for a ‘plug and play’ approach to ensure digital access to information from diverse sources.
ü The platform will reduce the complexity of multiple technical integrations, and will enable borrowers to get the benefit of seamless delivery of credit, and quicker turnaround time without requiring extensive documentation.
ü In sum, by digitising access to customer’s financial and non-financial data that otherwise resided in disparate silos, ULI is expected to cater to large unmet demand for credit across various sectors, particularly for agricultural and MSME borrowers.
ü “The ‘new trinity’ of JAM-UPI-ULI will be a revolutionary step forward in India’s digital infrastructure journey,” he stated.
ü The JAM (Jan Dhan, Aadhar and Mobile) trinity is a tool used by the government to transfer cash benefits directly to the bank account of the beneficiary.
