Virendra Pandit
New Delhi: After the spectacular success of the Unified Payments Interface (UPI) in India and some other countries, the Reserve Bank of India (RBI) is set to launch a Unified Lending Interface (ULI) to transform the South Asian country’s lending space.
“Just like UPI transformed the payments ecosystem, we expect ULI will play a similar role in transforming India’s lending space,” RBI Governor Shaktikanta Das said on Monday.
The ongoing ecosystem of digital payments in India offers a unique bouquet of simple, safe, and secure options for instant or quick transfer of funds, both large and small value for businesses as well as for individuals.
The much-acclaimed UPI, a real-time payments system, was launched in India in April 2016 by the National Payments Corporation (NPCI). It has played a significant role in the growth of retail digital payments in India.
“Last year, we launched a pilot of a technology platform which enables frictionless credit. We proposed to call it Unified Lending Interface (ULI),” Das said while addressing the inaugural session of the Global Conference on DPI and Emerging Technologies in Bengaluru.
The ‘new trinity’ of JAM-UPI-ULI will be a revolutionary step forward in India’s digital infrastructure journey,” Das said. The acronym ‘JAM’ stands for the integration of Jandhan bank accounts and Aadhar numbers with mobile phones.
The ULI will facilitate a seamless and consent-based flow of digital information, including even land records of various states, from multiple data service providers to lenders. It will cut down the time taken for credit appraisal, especially for smaller and rural borrowers.
Das said the ULI architecture has common and standardized APIs, designed for a ‘plug and play’ approach to ensure digital access to information from diverse sources resulting in reducing the complexity of multiple technical integrations.
It will enable borrowers to get the benefit of seamless delivery of credit, quicker turnaround time without requiring extensive documentation, he said.
“By digitizing 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 added.
About the Central Bank Digital Currency (CBDC), he said there should not be any rush to roll it out system-wide before a comprehensive understanding of its impact on users, monetary policy, the financial system, and 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,” Das added.
RBI launched CBDC pilots both in retail and wholesale segments in 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,” Das said.