Demystifying RBI’s Unified Lending Interface (ULI) Platform

In the past decade, India has been a flag bearer globally for digital innovations in the financial sector. The Unified Payment Interface (UPI) initiative introduced for seamless digital payments has transitioned into the number one monetary transaction platform in the country. In just August of 2024, official records indicate that over 14.9 billion transactions took place on the UPI network in the country. In addition to the enormous scale of digitization in the country’s payment landscape, UPI is also seen as an instrument that fosters inclusivity and participation of citizens from across the country.

It did not matter if one resided in a metropolitan city or a remote village, UPI is accessible to everyone. The benefit of zero merchant fees also added to the adoption rates as businesses of all sizes promoted UPI payments in place of cash or expensive debit or credit cards. The success of UPI in penetrating and guaranteeing mass inclusion is something the Government of India as well as the financial guardian of the country, the RBI, wanted to leverage in transforming the lending ecosystem of the country. As such, the concept of frictionless credit began shaping up into a possibility.

The Introduction of ULI

Last year, the RBI launched a pilot program that included the development of technology needed to build a frictionless credit system that guarantees access to lending opportunities for people from all walks of society with minimal documentation and other official hassles or delays. In August of 2024, the RBI has come up with an official initiative of the pilot program and it will be christened Unified Lending Interface or ULI.

What is ULI?

In simple terms, ULI is a credit Digital Public Infrastructure (DPI) built and operated by the RBI. It will facilitate the seamless acquisition, exchange, and storage of all digital information needed for appraising a credit request. The information includes not just credit scores and bank info, but also land records from both central and regional government authorities, digital identities, etc.

For a typical lending process, a lender needs to appraise several documents and identification records that require either the lender or the loan applicant to manually obtain information that exists with different government agencies or custodians. The manual acquisition and processing typically consume a great deal of time and effort and can result in significant cost overheads that get passed on to the consumer.

With ULI, all required credit insights will be readily available and supplied to lenders with the consent of the loan applicant. The siloed data residing in different systems will be acquired, processed, and transferred to the lender in the required format through an API thereby creating an end-to-end digital workflow for the loan process.

 

The Key Benefits of ULI

ULI is a revolutionary step in democratizing access to credit facilities for people in different socio-economic conditions. India’s large agricultural and rural SME sector often faces hindrances in acquiring funds through the country’s credit network. ULI can be a big relief in such scenarios. Let us explore the 2 critical elements that make ULI a major asset for customers and lenders:

·       Faster loan approvals

The primary reason for delayed loan processes is the long list of official records and documents that need to be procured from different entities which results in significant time and manual effort. It is often the responsibility of the applicant to manually acquire relevant documents and proof from different government bodies and then submit them at the physical branch where it will again be evaluated by the bank’s appraisers. With ULI, the required financial and non-financial data of an applicant for availing credit is available with just a click from the lender. Once the applicant provides consent, the lender gets a digital snapshot of the applicant that contains all required information and records that are used to qualify them for the loan.

·       Automated Data Exchange

With ULI, information retrieval and exchange happen automatically and under the control of the central bank of the country. This secure method enables banks or lenders to swiftly process loans without any further appraisals. The ULI platform offers a credit guarantee as the outcome of a request if the applicant has the necessary financial assets and earning potential to repay the credit availed.

The Path to Instant Loans

ULI is setting the Indian credit ecosystem in a direction of financial agility. Just like how UPI enabled a risk-free and cost-effective transactional ecosystem, ULI will facilitate real-time digital information supply to lenders thereby allowing them to offer loans in just minutes (instead of days or weeks) to eligible applicants. While the information needed for credit appraisal is siloed away in different systems, ULI brings a unified platform that acts like a plug-and-play information repository that offers the necessary insights to lenders with just an API call.

Such a high degree of agility in the financial sector will be a breakthrough for India as it can empower millions of citizens to avail credit easily. These folks cannot fully utilize the right financial aid available with banks and other financial institutions owing to the friction existing in manual-intense loan appraisal processes. As ULI begins to spread its wings, banks and financial institutions need to be prepared for a range of integrations of the service with their existing digital ecosystem.

Ensuring seamless and secure interoperability with ULI solutions will help first movers quickly progress once the technology is formally introduced into the market. This is where a knowledgeable partner like Verinite can be a major asset for banks and financial institutions. Get in touch with us to explore how your financial business can tap into the opportunities of the ULI digital revolution at the earliest.