The Reserve Bank is going to bring a new Unified Lending Interface on a pan-India basis for augmenting lending to various sectors including farm and MSME borrowers, said RBI Governor Shaktikanta Das.
Speaking at a global conference, Das said after a successful pilot study, the system would soon be operationalized across the nation.
"Just as UPI did in the payment space, we expect ULI to do with lending in India. Jam and UPI, along with ULI doing the jam, brings into play a giant leap in digital infrastructure in this country," added Das.
Furthering the digitalization of banking, last year, the RBI kicked off the pilot for the technology platform designed to facilitate frictionless credit. In this open network in digital data, seamlessly and with prior consent, not only across service providers but also across states pertaining to land records, the lenders are permitted to source.
This helps considerably reduce the time taken for credit evaluation and benefits smaller and rural borrowers the most, explained Das. He said that basically, the architecture of ULI came with common and standardized APIs, which actually promote a 'plug and play' method to undertake digital access of information available through different sources.
This removes complexity arising from multiple technical integrations and allows borrowers to get seamless credit delivery through a reduced process time without much paper trail.
In effect, through digital access to customers' financial and non-financial data which was kept in silos in different applications, ULI will immensely meet the enormous unsatisfied demand for credit across sectors, especially in respect of agricultural and MSME borrowers, pointed out Das.
He stressed India's special path, where the development of Digital Public Infrastructure is such that the main technical infrastructure is created, operated, and managed by the public sector, and various innovative services to the consumer are developed by the private sector.
The JAM trinity—the combination of Jan-Dhan Accounts, Aadhaar, and Mobile Phones—proved itself to lay the foundation for DPI, now to be used for delivering value-added services at delivering financial assistance. Importantly, over 67% of the beneficiaries under the JAM initiatives are from rural areas, and more than 55% are women.
This illustrates the role played by the DPI in promoting financial inclusion. The second item Das mentioned is as a showpiece of India's DPI: the framework for Account Aggregators, another regulatory initiative of the Reserve Bank. Under this framework, with customer consent, participants of the financial ecosystem that are eligible can share and aggregate customers' financial data in a safe, transparent, and secure way.
It enables MSMEs to access cash flow-based financing from credit providers with minimal documentation. Participating on the issue of Central Bank Digital Currency, a very important topic that has been entered into policy discussions around the world, Das said that the Reserve Bank has launched CBDC pilots for both retail and wholesale segments towards the end of 2022. The retail pilot so far has seen over 5 million users and 16 participating banks.
As I mentioned, the pilot started by being focused on payments, but later expanded to test both offline and programmable functionalities. CBDC programmability is going to be important for financial inclusion by ensuring that the funds really reach the intended people.
However, Das made it clear that it is gradually introduced. It is done carefully to fully understand the implication vis-à-vis the users, the monetary policy, the financial system, and the current economy before a national rollout of the CBDC. He added that the switching would be based on data generated during the pilot.
It supports the future of the payment system—both within the nation and abroad.
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