RBI to launch Unified Lending Interface to speed up credit for rural borrowers

Reserve Bank of India (RBI) governor Shaktikanta Das said on Monday the central bank is looking at a nationwide launch of a technological platform called the Unified Lending Interface (ULI) in due course to speed up disbursal of credit, especially to rural and smaller borrowers.

Speaking at a global conference on ‘Digital Public Infrastructure and Emerging Technologies’ in Bengaluru, Das said ULI is expected to transform the retail lending system much like the Unified Payments Interface (UPI).

“Just like the Unified Payments Interface changed the payments ecosystem, similarly we expect ULI to transform the lending landscape,” the governor said.

Exactly a year ago, the central bank had developed the Public Tech Platform to enable frictionless credit. It was aimed at providing digital information to lenders to facilitate credit or loans in just a few minutes.

RBI realized the data required for credit appraisal was available with different entities like central and state governments, account aggregators, banks, credit information companies, digital identity authorities, etc. The data being available in separate systems created a hindrance in frictionless and timely delivery of loans.

The end-to-end digital platform was therefore designed in such a way that an open architecture with open application programming interfaces (APIs) will enable all financial sector players to connect seamlessly in a ‘plug and play’ model.

The tech platform is the culmination of pilot projects that began in 2022, which included end-to-end digitalization of Kisan Credit Card (KCC) loans and digital dairy loans. These projects saw a significant reduction in turnaround time and brought intended efficiency in the loan processing. The platform was later expanded last year to include other digital loans.

According to RBI’s annual report, the platform as on 31 March had five loan journeys, including KCC loans up to ₹1.6 lakh; dairy loans; unsecured micro, small and medium enterprise (MSME) loans; personal loans and home loans; with a total of 12 banks participating in the pilot, which commenced on 17 August 2023. The platform currently enables linkage with 31 different data services.

“ULI is expected to cater to large unmet demand of credit for various sectors for agriculture and MSME borrowers,” said Das. “This platform facilitates 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, especially for smaller and rural borrowers,” he added.

The digital Public Tech Platform is part of the central bank’s digitalization of banking services, according to Das. “The new platform is also based on consent of potential borrowers, and data privacy is fully protected,” he said.

Das said that earlier there was the trinity of Jan Dhan Accounts, Aadhaar and Mobile Phones, or JAM, and now a new trinity is being proposed.

“The new trinity, JAM, UPI and ULI, Central Bank Digital Currency (CBDC) to be rolled out gradually, is a revolutionary step in India’s digital public infrastructure journey,” he said. “This initiative reduces complexity of multiple technical integration, enables borrowers to get the benefit of seamless delivery of credit, quicker turnaround time without requiring extensive documentation,” he added.

The platform is beneficial to all stakeholders, including consumers, lenders and data service providers. Consumers can get frictionless, tailored credit through consent architecture without the need for paper-based documentation or physical visits to financial institutions. Lenders and data service providers benefit due to the network effect, standardization, efficiency in terms of cost, innovation in lending process, scalability and increasing reach.

Going ahead, ULI can continue to unlock even more data from sources such as gig platforms and payment systems for driving deeper insights and smarter credit decisions.

Bankers say the platform is currently being developed and handled by the Reserve Bank Innovation Hub, a wholly owned subsidiary of the RBI that facilitates innovation in the financial sector. However, it will soon have to be handed over to the National Payments Corporation of India or any other entity at a later stage to oversee.