The nationwide launch of a technology platform that would enable frictionless credit across sectors, particularly for agricultural and MSME borrowers, will be done in due course, said RBI Governor Shaktikanta Das.
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This is based on RBI’s experience with the pilot of this technology platform, which was launched last year. The central bank plans to call the platform ‘Unified Lending Interface’ (ULI).
“Just like UPI (Unified Payments Interface) has transformed the payments ecosystem, we expect ULI will play a similar role in transforming the lending space in India.
“The ‘new trinity’ of JAM (Jan Dhan, Aadhar, Mobile)-UPI-ULI will be a revolutionary step forward in India’s digital infrastructure journey,” Das said at the RBI@90 Global Conference on “Digital Public Infrastructure and Emerging Technologies”.
The Governor said the ULI platform facilitates seamless and consent-based flow of digital information, including land records of various states, from multiple data service providers to lenders.
“This cuts down the time taken for credit appraisal, especially for smaller and rural borrowers. The ULI architecture has common and standardised APIs (application programming interfaces), designed for a ‘plug and play’ approach, to ensure digital access to information from diverse sources.
“This reduces the complexity of multiple technical integrations. It enables borrowers to get the benefit of seamless delivery of credit and quicker turnaround times without requiring extensive documentation,” he said.
Das emphasised that by digitising access to the customer’s financial and non-financial data that has otherwise resided in disparate silos, ULI is expected to cater to large unmet demand for credit across sectors, particularly for agricultural and MSME borrowers
- Also read: CBDC can complement UPI well
CBDC
The Governor cautioned against any rush to roll out system-wide the Central Bank Digital Currency (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. The CBDC can be phased in gradually. Undoubtedly, it has the potential to underpin the payment systems of the future, both for domestic payments and cross-border payments,” he said.
CBDC is the legal tender issued by the central bank in a digital form. It is a digital or virtual currency. It is the same as a fiat currency and is exchangeable one-to-one with the fiat currency. Only its form is different. In India, RBI launched CBDC pilots in both retail and wholesale segments in late 2022.
“The retail pilot currently has over 5 million users and 16 participating banks. While the pilot started with an initial use case of payments, currently both the offline and programmability functionalities are also being tested.
The programmability feature of CBDC could serve as a key enabler for financial inclusion by ensuring delivery of funds to the targeted user,” Das said.
Referring to a pilot launched by SBI on August 16, 2024, in Odisha and Andhra Pradesh, the Governor said: “Tenant farmers often find it difficult to access agricultural credit for inputs and raw materials as they do not have the land title to submit to the banks.
“However, programming the end use for purchase of agricultural inputs can give banks the required comfort and thus establish the identity of a farmer, not through his land holding, but through the end use of funds being disbursed.”
He also mentioned another use case (involving IndusInd Bank), whereby farmers get purpose-bound money through programmable CBDC for the generation of carbon credits.
Other new use cases aimed at testing features such as anonymity and offline availability, are proposed to be rolled out gradually.
AI and DPI
Das observed that integration of Artificial Intelligence (AI) into financial services, including through chatbots, internal data processing for intelligent alerts, fraud risk management, credit modelling and other processes, brings significant opportunities for all stakeholders.
“For customers, AI enables hyperpersonalised products and faster, more relevant services. Financial institutions like lenders benefit from advanced tools for risk and fraud management, streamlined operations, and reduced compliance costs.
“Regulators gain enhanced oversight and real-time monitoring capabilities, which would improve regulatory enforcement and market stability,” he said, adding such advancements come with serious challenges.
He cautioned that data privacy concerns arise from handling vast volumes of personal information. Ethical AI governance is essential to ensure fairness and prevention of bias.
“Financial institutions must ensure that AI models are explainable, i.e., the ability to explain why certain results are produced. AI technology can also be misused to spread misinformation, potentially causing severe damage and disruption to DPIs (Digital Public Infrastructure) as well as other digital systems. They can also damage the reputation and operations of financial institutions,” Das said.
When it comes to regulated financial institutions, he underscored careful adoption of AI in critical decision-making segments, for example in loan sanctioning. While AI can definitely assist the process, the institutions using them should have a proper understanding of the models and ensure accountability of the outcomes.
