ULI is a boon for loan seekers as it is a platform that directly connects lenders to borrowers. ULI simplifies the credit underwriting and borrowing process for customers, especially when it comes to customers with no credit history.
The ULI platform works on standardized application programming interfaces (APIs) that allow lenders to access information from a variety of sources in a “plug and play” manner. APIs simplify technology integration, speeding up the lending process and reducing the need for extensive documentation.
Lenders will access data about the applicant through ULI from various databases such as land records from various states, banks, NBFCs or fintech sources available on the ULI platform, thereby reducing the time required for credit assessment.
ULI Launch Date
ULI is currently in its pilot phase, RBI is set to launch the ULI app on April 1, 2025, after its launch, borrowers will be able to avail their loans through it.
How does ULI Work?
People who are taking loan for the first time and have no credit history and working documents, traditionally it was very difficult for them to get a loan. But with ULI, all these challenges are solved.
Its “Plug and Play” model frees ULI lenders from the need to collect multiple documents, making important data like the borrower’s financial status, property available at one place.
For example, if a dairy farmer applies for a loan, the lender can easily access data such as cash flows from milk cooperatives, land ownership status from state governments, farming patterns, and financial status from the ULI platform. This information, which previously was difficult for lenders to obtain, is now available within minutes, allowing loan decisions to be taken faster.
ULI also benefits tenant farmers who face difficulties in accessing loans due to lack of land ownership. The platform can verify the purpose of the loan, ensuring that the funds are used for agricultural inputs, giving lenders the confidence to issue loans without traditional collateral.
How did ULI Start?
On August 10, 2023, the Reserve Bank of India (RBI) announced the creation of a public tech platform for frictionless credit, now known as the Unified Lending Interface. With digitalization advancing rapidly, RBI created a centralized point of access to data required for credit assessment.
Before ULI, a pilot project was launched in September 2022 to digitalize Kisan Credit Cards (KCC) with loans less than ₹1.6 lakh. The project was rolled out in selected districts of Madhya Pradesh, Tamil Nadu, Karnataka, Uttar Pradesh and Maharashtra, the results of which were astonishing, showing that loans can be disbursed to borrowers in a simple and paperless manner.
Benefits of ULI
- ULI significantly reduces the time taken to process and approve loans.
- To provide credit to disadvantaged borrowers such as rural borrowers, tenant farmers and small business owners.
- There is a possibility that interest rates may be lower or loan terms may be better for borrowers.
- One of the biggest strengths of ULI is the availability of loan even without formal credit history or adequate documentation.
- The need for extensive paperwork for the loan is reduced.
- Borrowers no longer have to visit offices to collect documents like land ownership, financial statements or income proof.
- ULI offers a “plug and play” model, where lenders and fintech companies can easily connect to the platform.
- Helps the lender make the right decisions by getting comprehensive and accurate data in near real-time. Due to which the number of default loans reduces.
- ULI maintains transparency between the lender and the borrower.
- ULI provides quick loans to small and medium enterprises (SMEs) and farmers for their working capital needs.
- ULI reduces the costs incurred in data collection and validation.
Future of ULI
Imagine what would happen if taking loans for agriculture, for its essential purposes, became as easy as transacting money through UPI. Broadly speaking, India’s economy will see rapid growth with improvements in agriculture, development of small enterprises, and a boom in the banking sector.