RBI to Launch Unified Lending Interface

• 28 Aug 2024

Source: TH

Why in News?

The Reserve Bank of India (RBI) plans to launch the Unified Lending Interface (ULI) at national level to transform India’s lending sector. The ULI was launched as a pilot project by the RBI in 2023.

What is Unified Lending Interface (ULI)?

• About: ULI is a digital platform that is expected to make the lending process easy.
  • It would enable friction-less credit while delivering banking services to farmers and MSME borrowers.
• Key Features of ULI:
  • Consent-Based Digital Access: ULI will provide lenders with digital access to both financial and non-financial data of customers, including land records, through a consent-based system.
  • Common and Standardised APIs: ULI will feature standardised Application Programming Interface (APIs) that allow for a ‘plug and play’ approach, simplifying data access and reducing technical integration complexity.
    • The 'plug and play' concept refers to ready-made facilities with essential infrastructure like power, network etc allowing industries to start operations immediately.
• Potential Benefits:
  • Frictionless Credit: ULI aims to facilitate a smoother lending experience by minimising paperwork, particularly for smaller and rural borrowers.
  • Reduced Appraisal Time: By consolidating data from various sources, ULI will minimise the time required for credit evaluation.
  • Centralised Data Access: The platform will consolidate financial and non-financial data from multiple sources, making it easily accessible to lenders.
  • Focus on Agriculture and MSMEs: ULI is expected to address the large unmet demand for credit in sectors such as agriculture and Micro, Small, and Medium Enterprises (MSMEs).
• Relation to Other Digital Initiatives:
  • JAM-UPI-ULI: ULI will be part of the 'new trinity' of JAM (Jan Dhan, Aadhaar, and Mobile), UPI, and ULI, representing a significant advancement in India’s digital infrastructure.
  • Digital Infrastructure: The integration of these systems aims to cater to the large unmet demand for credit and enhance financial inclusion.

What are the Other Platforms that Facilitate Lending in india?

• Public Credit Registry (PCR): PCR is a central database that stores comprehensive credit information of borrowers to help lenders assess creditworthiness and reduce information asymmetry in the credit market.
• Account Aggregator (AA) Framework: AA Framework is a consent-based RBI-regulated platform that enables customers to share their financial information across institutions, streamlining access for lenders and facilitating quicker, informed lending decisions.
• Credit Information Companies (CICs): Companies like CIBIL, Equifax, Experian etc collect and maintain credit information of individuals and businesses.
• Trade Receivables Discounting System (TReDS): TReDS is an electronic platform that allows MSMEs to auction their trade receivables at competitive rates.
• Peer-to-Peer (P2P) Lending Platforms: Online platforms like Faircent and Lendbox allow individuals to lend and borrow money directly from each other.

UPSC Civil Services Examination Previous Year Question (PYQ)

Prelims

Q. Which of the following phrases defines the nature of the ‘Hundi’ generally referred to in the sources of the post-Harsha period? (2020)

(a) An advisory issued by the king to his subordinates

(b) A diary to be maintained for daily accounts

(c) A bill of exchange

(d) An order from the feudal lord to his subordinates

Ans: (c)

Q. Consider the following statements: (2020)

1. In terms of short-term credit delivery to the agriculture sector, District Central Cooperative 
2. Banks (DCCBs) deliver more credit in comparison to Scheduled Commercial Banks and Regional Rural Banks.
3. One of the most important functions of DCCBs is to provide funds to the Primary Agricultural  Credit Societies.

Which of the statements given above is/are correct?

(a) 1 only 

(b) 2 only

(c) Both 1 and 2 

(d) Neither 1 nor 2

Ans: (b)