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Home / IAS Preparation / Unified Lending Interface (ULI)

Unified Lending Interface (ULI) by RBI: A ‘UPI’ of Credit Sector | UPSC Notes

Last Updated on Sep 02, 2024
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The Reserve Bank of India (RBI) has announced that it is planning on piloting the Unified Lending Interface (ULI), a groundbreaking platform aimed at revolutionizing the lending process in India. Unified Lending Interface (ULI) is expected to become the “new UPI” of the credit sector, offering a frictionless credit experience.This initiative by Reserve Bank of India (RBI) is expected to usher a new era in credit management in India.The platform is set for a nationwide launch soon. 

The topic Unified Lending Interface (ULI) relates to UPSC General Studies Paper III on Economy, Growth and Development. The concept of the ULI and UPI basically lend a helping hand to comprehend the issues pertaining to credit system and digital payments respectively in India.

Syllabus

General Studies - III

Topics for Prelims

Union Budget, Credit Management, Enhance Credit Guarantee Scheme, Reserve Bank of India (RBI), Government Schemes, Unified Payment Interface (UPI),

Topics for Mains

Financial Inclusion, Growth and Development, Financial Literacy, Banking Reforms, Empowerment of Marginalized Section

What is Unified Lending Interface (ULI)?

It is important to know that in August 2023, the Reserve Bank of India (RBI) decided to launch a pilot project to create a public tech platform designed that will streamline the whole credit processes. The aim of launching it was to reduce costs, expedite disbursements, and enhance its scalability. 

The Reserve Bank of India (RBI) Governor proposed naming this platform the Unified Lending Interface (ULI), drawing a parallel with how the well recognised Unified Payment Interface (UPI) revolutionized the entire payments in India. Unified Lending Interface (ULI) is anticipated to have a similar transformative impact on credit or lending ecosystem in India. 

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Need for Unified Lending Interface (ULI) 

These are the following reasons due to which the need for Unified Lending Interface (ULI) was felt:

  • Digitalization and Innovation: India in recent times has made huge progress in the digitization process and has fostered path breaking innovation in payments, credit system and financial services by banks, Non Banking Financial Corporations (NBFCs), unicorns, start ups, fintech companies etc.
  • Data Fragmentation: However, credit appraisal data is not integrated completely. It is scattered across various systems, creating a complex barrier to smooth and timely lending process. Unified Lending Interface (ULI) aims to overcome these obstacles and streamline the entire credit system. 

About Unified Lending Interface (ULI)

Unified Lending Interface (ULI) will enable a consent-based flow of digital information, including state land records, from multiple sources to lenders. This will expedite credit appraisals, particularly for smaller and rural borrowers. 

The platform will lead to simplification of technical integrations through standardized APIs, reducing the need for extensive documentation and making credit delivery quicker and more efficient than ever.

Unified Lending Interface (ULI) is designed for a plug-and-play approach to enhance quicker accessibility for lenders. It also ensures complete data privacy by operating on the consent of potential borrowers. 

Benefits of Unified Lending Interface (ULI)

Unified Lending Interface (ULI) will help to address the large unmet demand for credit, especially in sectors like MSMEs, agriculture etc. by digitizing the access to financial and non-financial data which are currently housed in separate systems. Economists view Unified Lending Interface (ULI) alongside JAM (Jan Dhan, Aadhaar, Mobile) and UPI, as a significant advancement in India’s digital infrastructure. 

About Unified Payment Interface (UPI) 

Unified Payment Interface (UPI) is a system that integrates multiple bank accounts into a single mobile application. It merges various banking features, fund routing and merchant payments under one platform. Unified Payment Interface (UPI) was launched in 2016 by the National Payments Corporation of India (NPCI).

Features of Unified Payment Interface (UPI) 

These are the following features of Unified Payment Interface (UPI):

  • Instant Money Transfer: Unified Payment Interface (UPI) allows immediate money transfer through mobile devices which is 24/7 available and 365 days a year. 
  • One for All: Unified Payment Interface (UPI) provides a single mobile application for accessing different bank accounts. 
  • Hassle-Free Transactions: Customers are not required to enter details again and again like Card number, Bank Account number, or Indian Financial System Code (IFSC) making transactions faster and simpler. 

Benefits of Unified Payment Interface (UPI)

Unified Payment Interface (UPI) offers a universal application for different types of transactions, single-click two-factor authentication and also ensures a safer transaction system. It enables easier fund transfer, In-App Payments (IAP), and eliminates the risk of data theft and customer’s virtual addresses. 

Unified Payment Interface (UPI) provides a single application for various bank accounts which are available round-the-clock and an easier complaint resolution through the app, and secure transactions using a Virtual ID. 

Key Takeaways for UPSC Aspirants

  • Monetary Policy:  Government uses fiscal policy measures to stabilize the market and RBI uses monetary policy and its tools like Bank rate , Repo Rate, Cash Reserve Ratio.
  • Priority sector lending: Some sectors have been earmarked by the RBI in which banks are mandated to lend at least a particular percentage of funds out of their total fund.
  • NBFCs: RBI not only regulates banks but also non banking financial corporations.
  • Financial Inclusion: Pradhan Mantri Jan Dhan Yojana, Pradhan Mantri Mudra Yojana and other schemes have been launched since 2014 to increase financial inclusion in India. 

We hope your doubts regarding the topic have been addressed after going through the above article. Testbook offers good quality preparation material for different competitive examinations. Succeed in your UPSC IAS exam preparations by downloading the Testbook App here!

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Unified Lending Interface UPSC FAQs

Reserve Bank of India (RBI) has increased the maximum limit for tax payments made through the Unified Payments Interface (UPI) to Rs 5 lakh per transaction.

Monetary Policy can be either contractionary or expansionary.

There are many tools like Bank Rate, Repo Rate, Reverse Repo Rate, Cash Reserve Ratio (CRR) etc used by the Reserve Bank of India.

There are six members of the Monetary Policy Committee (MPC) including RBI Governor. Three members are from Reserve Bank of India and rest three are the nominated ones from Government of India.

Yes, it is possible to use Unified Payment Interface (UPI) without a smartphone. It has been done to increase more accessibility as there are still
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