RBI poised to launch nationwide ULI system to speed up lending to MSMEs & farm sector

BENGALURU: The Reserve Bank is poised to launch a new nationwide Unified Lending Interface (ULI), on the same lines as UPI, to enhance lending to various sectors of the economy, especially the agricultural and MSME borrowers, RBI Governor Shaktikanta Das said on Monday.

In his address at a global conference here, Das said that the RBI had successfully carried out a pilot project and based on this experience, a nationwide launch of the ULI system 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. The ‘new trinity’ of JAM-UPI-ULI will be a revolutionary step forward in India’s digital infrastructure journey,” Das remarked.

Continuing on this journey of digitalisation of banking services, last year we launched the pilot of a technology platform which enables frictionless credit. This platform facilitates a seamless and consent-based flow of digital information, including even land records of various states, from multiple data service providers to lenders. This cuts down the time taken for credit appraisal, especially for smaller and rural borrowers, Das explained.

He further stated that 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. It enables borrowers to get the benefit of seamless delivery of credit, and quicker turnaround time without requiring extensive documentation.

“In sum, by digitising access to 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,” Das remarked.

He pointed out that India’s DPI journey is a unique model, wherein the base technical infrastructure is built, operated and managed in the public sector, while the private sector accesses the DPI to create innovative customer-facing services.

The trinity of Jan Dhan Accounts, Aadhar and Mobile Phones, popularly known as the JAM trinity, has provided the base DPI infrastructure which is being leveraged for multiple value-added services. Over 67 per cent of the beneficiaries under the JAM trinity initiatives are from rural areas and over 55 per cent are women. This clearly demonstrates the role of DPIs in promoting inclusion.

He cited the Account Aggregator (AA) framework, a regulatory initiative of the Reserve Bank as another example of DPI in India. This framework facilitates consent-based sharing and aggregation of financial information of customers among eligible financial system participants in a secure, transparent, and efficient manner. It enables MSMEs to access cash flow-based financing from lenders with minimal documentation.

Referring to the Central Bank Digital Currency (CBDC) that has dominated recent policy discourse across the world, Das said, “In India, the Reserve Bank launched CBDC pilots in both retail and wholesale segments in late 2022. The retail pilot currently has over 5 million users and 16 participating banks. While the retail pilot started with the initial use case of payments, currently both the offline and programmability functionalities are also being tested. The programmability feature of CBDC could serve as a key enabler for financial inclusion by ensuring delivery of funds to the targeted user.”

However, at the same time, he said it is important to emphasise that there should not be any rush to roll out system-wide CBDC before one acquires a comprehensive understanding of its impact on users, on monetary policy, on the financial system and on the economy. Such understanding would emerge from the generation of user data in pilots. The actual introduction of CBDC can be phased in gradually. Undoubtedly, CBDC has the potential to underpin the payment systems of the future, both for domestic payments and also cross-border payments, he added.