RBI Unveiled a New Lending Platform ULI to Transform Credit Delivery

On August 26, 2024, Reserve Bank of India (RBI) Governor Shaktikanta Das announced that the Unified Lending Interface (ULI), a new technology platform currently in its pilot stage, is set to revolutionise credit delivery to farmers and MSME borrowers by enabling frictionless access to banking services.

Speaking at a global conference on digital public infrastructure and emerging technologies in Bengaluru, Mr Das explained that ULI will facilitate the seamless, consent-based transfer of digital information, including land records from various states, from multiple data providers to lenders. This process significantly reduces the time required for credit appraisal, particularly benefiting small and rural borrowers.

“The ULI platform employs a common and standardised API architecture designed for a ‘plug and play’ approach, ensuring digital access to information from diverse sources,” Mr Das stated. He emphasised that this would simplify the technical integration process for lenders and allow borrowers to access credit more quickly and with minimal documentation.

Mr Das highlighted that by digitising access to both financial and non-financial customer data, which currently exists in disparate silos, ULI is expected to address the large unmet demand for credit across various sectors. He also indicated that the nationwide rollout of ULI is imminent.

“Just as UPI transformed the payments ecosystem, we expect ULI to have a similar impact on the lending space in India,” the Governor remarked.

Mr Das also touched on the progress of the Central Bank Digital Currency (CBDC) in India, noting that it has been a significant focus in recent policy discussions worldwide. The RBI initiated CBDC pilots in both retail and wholesale segments in late 2022. While the retail pilot began with payments, it has since expanded to test offline and programmable functionalities.

He pointed out that the programmability feature of the CBDC, currently used by over 5 million retail users across 16 participating banks, could be a key driver of financial inclusion. For instance, tenant farmers, who often struggle to secure agricultural credit due to the lack of land titles, could now access credit by programming funds specifically for the purchase of agricultural inputs. This programmability could give banks the assurance needed to extend credit based not on land ownership but on the intended use of the funds.

Mr Das also mentioned another innovative application of CBDC: farmers receiving purpose-bound money through programmable CBDC for the generation of carbon credits. He added that new use cases, including features such as anonymity and offline functionality, are planned to be introduced gradually.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.