RBI plans nationwide launch of Unified Lending Interface soon

Move expected to revolutionize the lending sector

MUMBAI: The Reserve Bank of India (RBI) Governor Shaktikanta Das announced on Monday that the central bank is set to launch the Unified Lending Interface (ULI) nationwide, a move expected to revolutionize the lending sector in India, much like how the Unified Payments Interface (UPI) transformed the payments ecosystem.

Speaking at the Global Conference on “Digital Public Infrastructure and Emerging Technologies,” Das highlighted that the ULI pilot, launched last year by the RBI to enable frictionless credit, has shown promising results. Based on the positive experience from the pilot, the RBI has decided to roll out ULI across the country.

“Just as UPI transformed the payments ecosystem, we expect ULI to play a similar role in transforming the lending space in India. The ‘new trinity’ of JAM-UPI-ULI will be a revolutionary step forward in India’s digital infrastructure journey,” Das stated.

Seemless flow of data to lenders

Das explained that ULI facilitates a seamless, consent-based flow of digital information, including land records from various states, from multiple data service providers to lenders.

This significantly reduces the time required for credit appraisal, particularly benefiting smaller and rural borrowers.

He further elaborated that the ULI architecture is built with common and standardized APIs, designed for a ‘plug and play’ approach. This ensures digital access to information from diverse sources, reducing the complexity of multiple technical integrations.

As a result, borrowers can enjoy seamless credit delivery and quicker turnaround times without needing extensive documentation.

“In sum, by digitizing access to a customer’s financial and non-financial data, which otherwise resided in disparate silos, ULI is expected to meet the large unmet demand for credit across various sectors, particularly for agricultural and MSME borrowers,” Das added.

Central Bank digital currency

On the topic of central bank digital currency (CBDC), Das emphasized that there should be no rush to roll out a system-wide CBDC before gaining a comprehensive understanding of its impact on users, monetary policy, the financial system, and the economy.

He noted that such understanding would come from the user data generated during pilot phases and suggested a gradual, phased introduction of CBDC.

“Undoubtedly, CBDC has the potential to underpin the payment systems of the future, both for domestic payments and cross-border transactions,” Das said.

The RBI launched CBDC pilots in both retail and wholesale segments in 2022. The retail pilot now has over 5 million users and 16 participating banks.

“While the retail pilot began with the use case of payments, we are now testing both offline and programmability functionalities. The programmability feature of CBDC could be a key enabler for financial inclusion by ensuring targeted delivery of funds,” Das concluded.