After UPI success, RBI unveils ULI to transform lending space

Reserve Bank Governor Shaktikanta Das has announced that the RBI will soon introduce the Unified Lending Interface (ULI) across the country. The new platform is expected to revolutionise India’s lending sector, much like the Unified Payments Interface (UPI) did for payments. Currently, credit appraisal is hindered by data being scattered across different entities like government bodies, banks, and identity authorities. ULI is designed to streamline this process, reducing the time needed for credit approval, especially for small and rural borrowers.

At the global conference on ‘Digital Public Infrastructure and Emerging Technologies,’ Governor Das explained the ULI platform, featuring standardised APIs and a ‘plug and play’ approach, will simplify digital access to information from various sources. This will benefit borrowers by ensuring smoother credit delivery and faster processing times, with minimal documentation requirements.

The ULI will enable lenders to access customers’ financial and non-financial data, including land records, digitally and with consent, from various sources. This will facilitate easier credit extension, particularly to farmers and micro, small, and medium enterprises (MSMEs), the RBI governor adds.

He also emphasised that ULI, along with Jan Dhan-Aadhaar-Mobile (JAM trinity) and UPI, represents advancement in India’s digital infrastructure. In the banking context, JAM refers to a system that enables direct cash transfers to beneficiaries' bank accounts.

“The trinity of Jan Dhan Accounts, Aadhar and Mobile Phones, popularly known as the JAM trinity, has provided the base DPI (digital public infrastructure) infrastructure which is being leveraged for multiple value added services. Over 67% of the beneficiaries under the JAM trinity initiatives are from rural areas and over 55% are women,” Das states.

The Central Bank Digital Currency (CBDC) has been a focal point in global policy discussions recently. In India, the RBI initiated CBDC pilots in both the retail and wholesale segments in late 2022. The retail pilot has now expanded to include over 5 million users and 16 participating banks. Initially focused on payments, the retail pilot is now also testing offline capabilities and programmability features.

“The programmability feature of CBDC could serve as a key enabler for financial inclusion by ensuring delivery of funds to the targeted user. Let me illustrate this by an actual pilot that was launched recently. Tenant farmers often find it difficult to access agricultural credit for inputs and raw materials as they do not have the land title to submit to the banks. However, programming the end use for purchase of agricultural inputs can give the required comfort to banks and thus establish the identity of a farmer not through his land holding but through the end use of funds being disbursed,” he notes.

Das emphasised that UPI could serve as a faster and more affordable option for cross-border remittances, particularly with small personal remittances, which can be quickly implemented. “It can be said that DPI has enabled India to achieve, in less than a decade, levels of financial inclusion that would have otherwise taken several decades or more. DPI spurs market innovation by reducing transaction costs, democratising access, maintaining competition through interoperability, and attracting private capital,” he notes.

India’s DPI journey represents a distinctive approach, where the core technical infrastructure is developed, operated, and maintained by the public sector. Meanwhile, the private sector leverages this infrastructure to create innovative services for customers. Developing DPI within the public sector offers the advantage of overcoming the private sector’s reluctance to invest in infrastructure with uncertain returns, Dass highlights.

Additionally, infrastructure created by the private sector might not guarantee equal access or interoperability for all users, he adds.