New ULI Lending System Replaces Credit Scores, Boosts Fast Loan Access

In a move to upgrade India's credit ecosystem, the Ministry of Finance is working on introducing Unified Lending Interface (ULI). The new digital lending ecosystem would eradicate the requirement for credit score checks conducted pre-sanctioning both credit cards, and personal loans, as per media reports.  

This initiative is led by the Department of Financial Services (DFS), with an intent to create an inclusive, transparent, and seamless lending ecosystem by integrating data, policy, and technology.

What Data Set Would ULI Use Unlike Credit Scores?

The ULI is meant to reduce the timeframe for loan approval and application process, leading to swift credit accessible to higher number of individuals, and entities, such as farmers, and small business owners.

Presently, lenders hugely base their decisions basis data provided by credit bureaus such as CIBIL, CRIF, and High Mark among the rest to determine an individual's repayment capability. Meanwhile, ULI lenders will be able to determine creditworthiness via assessing data set including returns, utility payment, and other relevant government records, which brings back the focus on several undeserved aspiring borrowers.

The Ministry of finance has recently confirmed that the top management of DFS, RBI and other government departments met to bolster ULI's implementation across the country. On the other hand, financial institutions have been advised to review adoption's pace on a month-to-month basis, and those who haven't joined in the ULI network yet.

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Key Features of ULI

Have a look at the main features of the soon-to-be new credit ecosystem of India

• Quicker access to loans without emphasis on no or low credit history
• Standardised APIs permit
• Consent based data sharing. This ensures transparency and privacy.
• Standardised APIs permit seamless integration across lending platforms.
• Lower operational costs, streamlines backend processes for lending institutions.
• Evaluation of non-traditional financial behaviour, boosts credit availability for underserved segments.