The Governor of the Reserve Bank of India (RBI), Shaktikanta Das, announced on Monday that the central bank is poised to introduce the Unified Lending Interface (ULI) across the nation shortly. This initiative is anticipated to revolutionise the lending landscape in India, similar to how the Unified Payments Interface (UPI) has transformed the payments sector.
The ULI pilot program was initiated last year by the RBI to facilitate seamless credit access. Based on insights gained from this pilot, the RBI has opted to implement ULI on a broader scale. “Just like UPI transformed the payments ecosystem, we expect that ULI will play a similar role in transforming the lending space in India. The ‘new trinity’ of JAM-UPI-ULI will be a revolutionary step forward in India’s digital infrastructure journey,” Das stated at the Global Conference on “Digital Public Infrastructure and Emerging Technologies.”
Das elaborated that ULI allows for a smooth and consent-driven flow of digital information, which includes land records from various states, sourced from multiple data service providers to lenders. This innovation significantly reduces the duration required for credit assessments, particularly benefiting smaller and rural borrowers.
He further explained that the ULI framework features common and standardised APIs, designed for a 'plug and play' model, ensuring digital access to information from diverse origins, thus simplifying the complexities associated with multiple technical integrations. As a result, borrowers will experience the advantages of streamlined credit delivery and faster processing times without the need for extensive documentation.
“In sum, by digitising access to customers’s financial and non-financial data that otherwise resided in disparate silos, ULI is expected to cater to a large unmet demand for credit across various sectors, particularly for agricultural and MSME borrowers,” Das added.
On the topic of central bank digital currency (CBDC), Das emphasised the necessity of a cautious approach before implementing a system-wide CBDC. He stressed the importance of thoroughly understanding its implications for users, monetary policy, the financial system, and the economy. “Such understanding would emerge from the generation of user data in pilots.
The actual introduction of CBDC can be phased in gradually. Undoubtedly, CBDC has the potential to underpin the payment systems of the future, both for domestic payments and also cross-border payments,” Das noted.
The RBI began CBDC pilots in both retail and wholesale segments in 2022. Currently, the retail pilot has over 5 million users and 16 participating banks. “While the retail pilot started with the initial use case of payments, currently both the offline and programmability functionalities are also being tested. The programmability feature of CBDC could serve as a key enabler for financial inclusion by ensuring the delivery of funds to the targeted user,” Das concluded.
