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The Reserve Bank of India is planning the nationwide launch of a public technology platform on “frictionless credit” called Unified Lending Interface soon. The central bank has been working on the pilot project since last year. Mint looks at whether ULI will be the next big development in digital banking.
What is ULI?
The Unified Lending Interface is a digital platform that is expected to speed up lending processes by facilitating the seamless flow of digital information, including land records of various states, from multiple data service providers to lenders. This cuts down the time taken for credit appraisals. It is aimed at meeting the large demand for credit across sectors, especially for agricultural and MSME (medium, small and micro enterprises) borrowers. It will aid the seamless delivery of credit and quicker turnaround time without requiring extensive documentation. According to RBI governor Shaktikanta Das, ULI is expected to transform the lending landscape just as the Unified Payment Interface (UPI) revolutionised the payment ecosystem.
What is the status of ULI so far?
According to the RBI’s annual report, the platform had conducted pilot projects in five loan segments as of 31 March – kisan credit card (KCC) loans up to ₹1.6 lakh, dairy loans, unsecured MSME loans, personal loans and home loans. Twelve banks participated in the pilot, which started on 17 August 2023. Since then, banks have disbursed loans worth ₹5,535 crore (including MSME loans of ₹3,640 crore) as of 31 March. The platform currently enables linkages with 31 different data services. Seven states, including Andhra Pradesh and Odisha, and select districts of Uttar Pradesh, Maharashtra, Tamil Nadu, Madhya Pradesh and Karnataka are part of the pilot project.
What is the genesis of ULI?
ULI is the new name given to the Public Tech Platform for Frictionless Credit, which was launched by the RBI last year. The idea for the platform came up after the RBI conducted pilot projects in 2022 for end-to-end digitalization of KCC and dairy loans. The platform-type architecture is expected to enable lenders to create a frictionless loan journey without the need for multiple integrations.
How will ULI work?
The RBI realised that the data required for credit appraisals was with entities such as the central and state governments, account aggregators, banks, credit information companies, and digital identity authorities. The availability of the data in separate systems created a hindrance in frictionless and timely delivery of loans. The digital platform was therefore designed to enable all financial sector entities to connect seamlessly in a ‘plug and play’ model. This reduces the complexity of multiple technical integrations.
Will ULI revolutionise banking, just like UPI?
UPI transformed India’s digital payment landscape by making it easy to send and receive money in real time, without traditional banking procedures. According to Das, the ‘new trinity’ of Jan Dhan accounts, Aadhaar and Mobile Phones, or JAM-UPI-ULI will be a revolutionary step in India’s digital infrastructure journey.
The platform is expected to benefit all stakeholders including consumers, lenders and data service providers. Consumers can get frictionless, tailored credit without the need for paper-based documentation or physical visits to financial institutions. Lenders and data service providers, however, benefit from the network effect, standardisation, efficiency in cost, innovation in lending process, scalability and increasing reach.