Credit score no longer a barrier? ULI aims to simplify and speed up lending
In a major shift that could result in transforming the country’s credit ecosystem, the Ministry of Finance is gearing up to roll out the Unified Lending Interface (ULI). This will be a new digital lending system that could eliminate the need for traditional credit score checks before sanctioning personal loans or credit cards, reported NDTV.
The move is spearheaded by the Department of Financial Services (DFS), it aims to create a more inclusive, transparent and seamless lending ecosystem by integrating data, policy and technology.
ULI to use alternative data like utility bills and GST returns
ULI is conceptualised to streamline the loan approval and application process. Thus making credit accessible to a broader segment of the masses, including but not limited to small businesses, farmers and those lacking a strong credit score.
Currently lending institutions rely heavily on credit bureaus such as CIBIL, CRIF High Mark, Equifax among others to assess an applicant’s repayment ability. Still with ULI lenders will be able to evaluate creditworthiness using alternative data such as utility payments, GST returns and other similar government records making it a clear game-changer for underserved aspirational borrowers.
Government pushes for swift ULI rollout across financial institutions
The Finance Ministry recently confirmed that top officials from DFS, RBI and various government departments met to improvise and accelerate ULI’s nationwide implementation. Financial institutions have been asked to review adoption progress on a monthly basis, and those yet to join the ULI network have been urged to act in swift fashion.
Key features of ULI include:
- Consent based data sharing. This ensures transparency and privacy.
- Standardised APIs permit seamless integration across lending platforms.
- Evaluation of non-traditional financial behaviour, boosts credit availability for underserved segments.
- Lower operational costs, streamlines backend processes for lending institutions.
If executed in seamless fashion and successfully, ULI could significantly bring down the dependency on credit scores, boost transparency and extend formal credit to segments earlier considered unbankable. For aspirational borrowers, this means easier, faster access to personal loans, without the stress of a low or nearly no credit history.
As the nation’s fintech sector continues to evolve and grow, ULI could prove to be the most impactful credit innovation yet, redefining how risk assessment is carried out in the lending ecosystem.
