After UPI has revolutionised the retail payment system, the Reserve Bank of India (RBI) is all set to launch the Unified Lending Interface (ULI) platform with an eye to transform the lending landscape.

The new platform will facilitate ‘frictionless credit’ flow and will particularly benefit smaller borrowers in rural areas. It will reduce the time taken for loan appraisal, lower costs, enable quick disbursement and ensure scalability. 

The ULI is in pilot stage and will be launched nationwide in due course, RBI Governor Shaktikanta Das said.

Last year, the RBI had launched a pilot of a technology platform which enables frictionless credit in two states.

“From now on, we propose to call it (the technology platform) the Unified Lending Interface. This platform facilitates seamless and consent-based flow of digital information, including even land records of various states, from multiple data service providers to lenders,” said Das at the RBI@90 Global Conference on ‘Digital Public Infrastructure and Emerging Technologies’.

Das said by digitising access to the customer’s financial and non-financial data that otherwise resided in disparate silos, ULI is expected to cater to large unmet demand for credit across various sectors, particularly for agricultural and MSME borrowers.

“Based on our experience from the pilot project, a nationwide launch of the ULI will be done in due course. Just like UPI transformed the payments ecosystem, we expect that ULI will play a similar role in transforming the lending space in India,” Das added.

He said the ULI will cut the time taken for credit appraisal, especially for smaller and rural borrowers. The ULI architecture has common and standardised APIs, designed for a ‘plug and play’ approach to ensure digital access to information from diverse sources.

This reduces the complexity of multiple technical integrations and enables borrowers to get the benefit of seamless delivery of credit, quicker turnaround time without requiring extensive documentation, he said.

He emphasised that the ‘new trinity’ of JAM-UPI-ULI will be a revolutionary step forward in India’s digital infrastructure journey.

The JAM (Jan Dhan, Aadhar and Mobile) trinity is a tool used by the government to transfer cash benefits directly to the bank account of the beneficiary.

In the inaugural speech, Das said UPI, a real-time payment system launched in India in April 2016 by the National Payments Corporation of India (NPCI), has played a significant role in the growth of retail digital payments in India.

NPCI was promoted by banks under the guidance of the RBI.

While initial participants on the UPI platform were banks, non-bank third party app providers and use of QR codes have all combined in popularising UPI.

It has since emerged as a robust, cost-effective and portable retail payment system and is attracting active interest across the globe, Das said.

The Governor further said that ideally, while the legacy payment systems should be able to connect to each other and so should the Central Bank Digital Currency (CBDC) systems, one country’s legacy system should also be interoperable with another country’s CBDC.

Actual implementation of interoperability would pose challenges and may involve certain trade-offs, he said.

Technical barriers may be surmounted by using common (international) technical standards. Further, the governance structure or management framework for long-term sustainability would also need to be finalised, Das said.

He said the UPI system has the potential to evolve into a cheaper and quicker alternative to the available channels of cross-border remittances.

A beginning can be made with small value personal remittances as it can be quickly implemented, the Governor added. 

Making rapid strides in digitisation, India has followed the theme of digital public infrastructure (DPI) which encourages banks, NBFCs, fintech companies and start-ups to create and provide innovative solutions in payments, credit, and other financial activities.

The RBI Governor noted that DPI fosters market innovation by lowering transaction costs, democratizing access, ensuring competition through interoperability and drawing in private capital.

"DPI has enabled India to achieve, in less than a decade, levels of financial inclusion that would have otherwise taken several decades or more," Das said.