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The Reserve Bank of India (RBI), as part of its strategy to create digital public infrastructure in the country, has announced that a new technology platform called the Unified Lending Interface (ULI) would be introduced by the Reserve Bank Innovation Hub, Bengaluru which will enable friction-less credit to farmers and MSME borrowers to begin with.

What is ULI?

The ULI platform, aims to revolutionize the credit underwriting process by enabling a streamlined and consent-based transfer of both financial and non-financial data from various sources to lenders.

1. Seamless Data Flow: ULI facilitates an efficient flow of digitized data, including crucial records like land titles, directly to lenders, enhancing the credit appraisal process.
2. Faster Credit Appraisal: The platform is particularly beneficial for smaller and rural borrowers who may lack extensive credit histories, significantly reducing the time required for credit assessments.
3. Standardized APIs: ULI employs common, standardized Application Programming Interfaces (APIs) that allow for a plug-and-play integration, simplifying the technical requirements for lenders and ensuring easy access to diverse data sources.
4. Access to Diverse Data: Lenders can access a wealth of information from various databases, including government records and satellite imagery, which can provide deeper insights into potential borrowers.
5. Opportunities for FinTechs: The platform also opens up opportunities for FinTech companies by connecting them with multiple lenders, thereby enhancing their ability to deliver tailored financial solutions.

ULI aims to create a more inclusive and efficient lending ecosystem, ultimately improving access to credit for a wider range of borrowers.

How will it work?

The ULI platform transforms the loan application process, especially for first-time borrowers and those without traditional credit histories. Here’s how it works:

1. Centralized Data Access: ULI acts as a single point of access for lenders to retrieve crucial economic data about loan applicants. This reduces the need for applicants to gather extensive documentation themselves.
2. Plug-and-Play Integration: Financial institutions can easily connect to the ULI platform through standardized APIs, allowing them to quickly access various data sources relevant to the borrower’s financial history and status.
3. Automated Data Retrieval: Instead of borrowers spending weeks collecting documents, lenders can automatically fetch necessary information from the platform. For instance, data for a dairy farmer may include:
   • Cash Flow Information: Sourced from local milk cooperatives.
   • Land Ownership: Verified through state land records.
   • Financial Insights: Derived from the farmer’s historical farming patterns.
4. Enhanced Visibility: This comprehensive data access turns what were previously blind spots for lenders into clear insights, allowing them to assess applicants more accurately.
5. Rapid Decision-Making: With immediate access to essential data, lenders can quickly determine the borrower’s income and creditworthiness. This streamlines decision-making, enabling loans to be sanctioned and disbursed within minutes.
6. Supporting Tenant Farmers: Tenant farmers, who typically struggle to obtain loans due to lack of land titles, can also benefit. ULI can facilitate loans by allowing banks to verify identity and eligibility based on the intended use of funds for agricultural inputs rather than land ownership.

In summary, ULI simplifies the loan process, making it faster and more inclusive for diverse borrowers by leveraging digital data access and automation.

How did it start?

The ULI platform, officially launched by the RBI on August 10, 2023, emerged from the need for a streamlined approach to credit appraisal in an increasingly digital landscape. Here’s how it all began:

1. Identification of Need: The RBI recognized that with rapid digitalization, there was a pressing need for a centralized platform to provide access to the data necessary for credit assessments. This was essential for facilitating frictionless digital credit delivery.
2. Pilot Project: To test the concept, the RBI initiated a pilot project focused on the digitalization of Kisan Credit Card (KCC) loans under ?1.6 lakh in September 2022. This pilot was launched in select districts across Madhya Pradesh, Tamil Nadu, Karnataka, Uttar Pradesh, and Maharashtra.
3. Encouraging Results: The initial outcomes of the KCC pilot were promising, showcasing the potential for seamless loan disbursement. The pilot demonstrated that loans could be disbursed at the doorstep, either through assisted or self-service modes, all without the need for extensive paperwork.
4. Development of ULI: Building on the success of the KCC pilot, the RBI moved forward with the establishment of the ULI platform to broaden the scope of digital credit accessibility for a wider range of borrowers.