For ‘frictionless credit’, RBI to launch technology platform; to call it Unified Lending Interface: Governor Shaktikanta Das

While announcing the pilot project for frictionless credit in August last year, the RBI had said that for digital credit delivery, the data required for credit appraisal are available with different entities like Central and State governments, account aggregators, banks, credit information companies and digital identity authorities. However, they are in separate systems, creating hindrance in frictionless and timely delivery of rule-based lending, it has said.

Das noted that ULI facilitates seamless and consent-based flow of digital information, including even land records of various states, from multiple data service providers to lenders thereby cutting down the time taken for credit appraisal, especially for smaller and rural borrowers.

The ULI architecture has common and standardised APIs (Application Programming Interface), designed for a ‘plug and play’ approach to ensure digital access to information from diverse sources, which reduces the complexity of multiple technical integrations. It will also enable borrowers to get the benefit of seamless delivery of credit, quicker turnaround time without requiring extensive documentation, he said.

“In sum, by digitising 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 explained.

He further said that while the integration of artificial intelligence (AI) can make processes simpler and more efficient, lenders need to be mindful of adopting such new-age technologies in critical decision-making segments such as loan sanctioning.

“AI promises to make processes simpler and efficient. It can also emulate decision making to a great extent. However, when it comes to regulated financial institutions, there should be careful adoption of AI in critical decision-making segments, for example, in loan sanctioning,” he said.

He said since AI is a data-driven science, the authenticity of data being used in training the models, the possibility of biases and concerns about data privacy need to be carefully examined.

Going beyond understanding the risks posed by AI, financial institutions should clearly outline the liabilities and ensure a calibrated and responsible adoption.

“It is important to be proactive to leverage the capabilities of new technologies, but at the same time it is essential to be abundantly mindful of the associated risks and challenges,” he said.

The Governor said that the AI technology poses various challenges such as data privacy concerns arising from handling fast volumes of personal information and spreading misinformation, which can potentially cause severe damage and disruption to Digital Public Infrastructure (DPIs), as well as other digital systems.

“Ethical AI governance is essential to ensure fairness and prevention of bias. Financial institutions must ensure that AI models are explainable, that is, the ability to explain why certain results are produced,” he said.

Digital Public Infrastructure refers to basic technology systems, created mainly in the public sector, that are openly available to users and other developers. DPIs are scalable, and thus can support systems that operate on a population-wide scale; they are interoperable, and therefore spur innovation by being accessible to innovators; and they are also cost efficient by virtue of their economies of scale.

shal He noted that there should not be any rush to roll out system-wide CBDC before one acquires a comprehensive understanding of its impact on users, on monetary policy, on the financial system and on the economy.

“Such understanding would emerge from generation of user data in pilots. Actual introduction of CBDC can be phased in gradually,” he said.

On cross-border payments, Das said while much efficiency has been achieved in case of wholesale markets, the retail cross-border space is still fraught with multiple layers that add to the cost and delays in cross-border remittances.

Commenting on the development, BankBazaar.com’s CEO Adhil Shetty said that the ULI platform not only promises a more streamlined credit ecosystem but also bolsters the capabilities of lenders and fintechs to innovate and expand their offerings effectively. By providing access to a diverse range of data sources, including land records, ULI empowers these entities to craft more precise lending solutions that cater to the unique needs of consumers.

“The full potential of ULI will be realised by integrating fintech loan service providers alongside traditional regulated entities within its robust ecosystem,” he said.