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.