The Indian credit market is expected to grow by billions in the coming years. However, traditional lending systems are non inclusive, and tedious. To address this, the Reserve Bank of India (RBI) sought to leverage cutting edge technologies in the India banking space with the launch of the Reserve Bank Innovation Hub (RBIH) and the creation of the Unified Lending Interface.
What is the Unified Lending Interface (ULI)?
The Unified Lending Interface is a transformative digital lending platform to facilitate seamless, transparent, and efficient access to credit, particularly benefiting rural and small-scale borrowers. ULI was announced by the Hon’ble RBI Governor, Shri Shaktikanta Das at the RBI@90 Global Conference on August 26, 2024, in Bengaluru.
The pilot of ULI (previously known as the Public Tech Platform for Frictionless Credit) began in August 2023. The Governor mentioned that the new trinity of JAM-UPI-ULI will be a revolutionary step forward in India’s digital infrastructure journey. Similar to how UPI altered the payments ecosystem in India, the ULI will transform the lending space. It aims to streamline the lending process by providing financial institutions with a single digital platform that consolidates diverse borrower information, making the entire lending journey—from application to disbursement—faster and more accessible.
Challenges ULI aims to address
MSME credit gap:
- It aims to address challenges faced by agricultural and Micro, Small, and Medium Enterprises (MSMEs) in accessing formal credit. MSMEs in India face a significant credit gap, with only a fraction of demand met by formal financial institutions.
- As per a report by Avendus Capital, the total addressable credit demand in the MSME sector is approximately $819 billion, of which only $289 billion was fulfilled through formal credit lenders such as private banks, public banks, and Non-Banking Financial Companies. This leaves a substantial credit gap of around $530 billion that remains unmet.
Fragmented financial data:
- It helps streamline lending for small-scale and rural borrowers by consolidating fragmented financial data, giving lenders a complete view of their creditworthiness.
- It also speeds up the traditionally slow loan process by providing instant access to required information, cutting down on assessment and approval times.
How does ULI work?
Centralized access of borrower data to lenders:
- It leverages Application Programming Interfaces (APIs) to provide lenders with centralized access to borrower data, including financial, non-financial information and alternate data for lenders like digitised state land records, milk pouring data from milk federations, satellite data and property search services, to name a few, through a single interface.
- The data is extracted from various sources, such as government databases, credit bureaus, and financial institutions eliminating the need for borrowers to carry out multiple bilateral integrations with each data and service provider.
Transparent access to borrowers:
- It provides borrowers with transparent access to loan products, interest rates, and terms from multiple lenders in one place, enabling them to choose the best option for their needs. This transparency fosters a competitive lending environment.
Integration with government schemes:
- It integrates government schemes to streamline support for agricultural and MSME sectors and serves as a platform to enhance borrowers’ financial literacy, empowering them to make informed financial decisions.
Key Data Sources Live on the Unified Lending Interface
- Land Record Systems: Integrates digital land record systems of state governments.
- GSTN Data: Fetches GSTN forms and other relevant data.
- Milk Pouring Insights: Cash flow and milk pouring data from State Dairy Federations.
- Satellite Data: Provides satellite imagery and analytics data.
- Authentication & Verification: Enables Aadhaar e-KYC, e-Sign, PAN validation, Bank account verification, e-Stamping.
- Account Aggregators: Consolidates digital financial information from customers’ accounts in real-time.
- Transliteration: Transliterating documents to various languages.
- Digilocker: Provides secure access to verified documents of customers.
- House/Property Search Data: Consolidates property data & analytics from various sources (real estate authorities, legal authorities, etc) for underwriting housing loans.
- CGTMSE: Facilitates government-backed credit guarantee scheme for MSMEs
Past innovations Integrated with ULI
Kisan Credit Card (KCC) Scheme:
- It facilitates the digital Kisan Credit Card (KCC) loan journey by providing lenders with streamlined access to essential data, such as land records, Aadhaar e-KYC, and credit scores, through standardized APIs.
- The KCC Scheme, introduced in 1998, has been the predominant mode of formal financing for 120 million farmers in India.
- By automating verification and eliminating paperwork, ULI significantly reduces the turnaround time for KCC loans from 4-6 weeks to 10 minutes, making credit more accessible and efficient for small and marginal farmers.
Cattle Loan Process/Cattle Financing:
- It simplifies the cattle loan process for India’s 80 million dairy farmers by using digital innovations, such as milk pouring and cash flow data from milk federations like Amul, to assess creditworthiness.
- This integration allows lenders to make quick loan decisions, reducing the turnaround time from weeks to just minutes, making credit access faster and more efficient for dairy farmers.
The Unified Lending Interface represents a transformative step towards enhancing financial inclusion for MSMEs and agricultural borrowers. By streamlining access to credit, simplifying the loan process, and fostering a competitive lending environment, it can drive growth, sustainability, and informed financial decision-making in these vital sectors. Integration with government schemes and financial literacy resources further empowers borrowers, enabling long-term success and economic stability.
