Unified Lending Interface (ULI)

Source- This post on Unified Lending Interface (ULI) has been created based on the article “RBI to launch Unified Lending Interface: What is it and how will it benefit borrowers” published in “Indian Express” on 27th August 2024.

Why in News?

RBI Governor Shaktikanta Das recently announced ULI to build on the success of the Unified Payments Interface (UPI) by streamlining the credit process.

About Unified Lending Interface (ULI)

1. Unified Lending Interface (ULI) is a platform developed by the Reserve Bank Innovation Hub (RBIH).

2. The platform uses standardized Application Programming Interfaces (APIs) to simplify technical integrations, allowing a ‘plug and play’ approach for digital access to diverse information sources.

3. The combination of JAM (Jan Dhan-Aadhaar-Mobile), UPI, and ULI is described as a “new trinity” that will drive India’s digital infrastructure forward.

Benefits of ULI

1. ULI aims to bring efficiency, reduce costs, and facilitate quicker credit disbursement across the country, especially for smaller and rural borrowers.

2. ULI aims to address the significant unmet demand for credit in sectors like agriculture and micro, small, and medium enterprises (MSMEs).

3. It facilitates the seamless and consent-based flow of digital information, including land records from various states to lenders from multiple data service providers.

Current Challenges with Digital Lending and the benefit offered by ULI

1. Data needed for credit appraisal is currently spread across various entities like governments, banks, account aggregators, and credit information companies. This makes seamless credit delivery difficult.

2. ULI’s architecture provides standardized APIs that offer a ‘plug and play’ solution, making it easier to access information digitally from different sources and reducing the complexity of multiple technical integrations.

How ULI is different from UPI

1. Focus: ULI focuses on lending and credit information sharing, while UPI focuses on digital payments.

2. Users: ULI is primarily for financial institutions and credit entities; UPI is for the general public and businesses for money transfers and payments.

3. Integration: ULI integrates multiple data sources for credit assessment; UPI integrates multiple bank accounts for seamless payments.

UPSC Syllabus: Indian Economy