Unified Lending Interface: Right Step Towards Financial Inclusivity, says Hemant Sood, Ludhiana
Recently, the RBI Governor Mr. Shaktikanta Das made a big announcement, introducing Unified Lending Interface (ULI). Inspired by the revolutionizing success of Unified Payment Interface, it aims to repeat the success by making similar waves in the lending space.
As per the announcement made by Governor Das, it will reshape how lenders access and utilize borrower data for speed and simplicity.
To get more insights into the aspect, we reached out to finance expert Hemant Sood. He is the Managing Director of Findoc Investmart, one of the leading finance firms in Ludhiana.
A Welcoming Democratic Move, Happy for Smaller Borrower: Hemant Sood on ULI
Sharing his enthusiasm and welcoming the new system, Hemant Sood said, "ULI is more than just a technological upgrade; it's a strategic evolution and, more importantly, the democratization of finance that addresses the core inefficiencies in our lending system, and, personally, I am happy for smaller and rural borrowers as now they will be free from cumbersome and lengthy documentation processes or waiting for extended periods."”
Unified Lending Interface – Problems and The Purpose
The existing credit appraisal is fraught with complexity and delays. There are three aspects of it.
First, borrowers face difficulty in accessing credit as they might not have a comprehensive financial profile and may not meet the heavy documentation requirements.
Two, lenders face challenges in accessing data from multiple, disjointed sources such as central and state governments, local authorities, banks, etc., while also incurring significant costs associated with manual data processing and risk assessment.
And third, regulators also struggle in monitoring and regulating a fragmented financial data ecosystem.
In between all these complexities, the delay makes the process costly and sometimes, futile.
The Purpose
A lot of the abovementioned problems can find their root in the scattered borrower data across different silos, and this is exactly where ULI strives to make a difference.
ULI aims to overcome complexity and delays by consolidating financial and non-financial data from various sources into a single platform and by simplifying and expediting the integration process.
Adding his insights and explanation, Hemant Sood said, “It will lead to a centralized framework that aggregates and standardizes data from a range of diverse sources. For example, the use of standardized APIs will ensure seamless connectivity between isolated data silos i.e. whether it's financial details from banks or non-financial data like land records from local authorities, all the required information will be available to be accessed in a swift and secure fashion on a single platform.”
Further, he said, “Practically, this consolidation reduces the steps in assessing a borrower's creditworthiness, reducing the time and complexity that has marred loan processing."
Impact on the Lending Sector
The introduction of ULI is seen as a pivotal development and it will have significant impact on multiple fronts.
Lower Interest Rates
With the digital integration of data, ULI will facilitate quicker loan approvals at lower operational costs for lenders. This means it will also bring down interest rates. This is particularly crucial for India's burgeoning sectors like agriculture and MSMEs, which have been toiling hard under traditional credit approval systems.
“For years, small and rural borrowers have been toiling under inefficient, opaque lending practices. They were time-consuming and many times defeated the purpose, or worse, ended up denying the loans altogether, depriving them of the necessary financial resources. This forces these small borrowers to rely on local lenders, who might not have their best interest in mind. In my opinion, ULI is a transformative step towards financial inclusivity, it makes the much-needed intervention to ensure fairer access to credit.” said Hemant Sood, appreciating the changes.
Helping Hand to Entrepreneur
“I also believe that this interface will open new avenues for investors. Simplified credit access will also encourage more vibrant entrepreneurial activity, expanding the potential investment pool. Hence, we are closely monitoring the rollout and adoption of ULI to identify the rising opportunities as the market adjusts to this new lending environment," shares Hemant Sood.
Investors-friendly Environment
Investors stand to gain from an environment where businesses can access credit more fluidly. Improved lending efficiency will lead to higher business activities and greater stability in financial returns, particularly in sectors that are critical to India’s economic growth.
"The ripple effects of ULI will be felt across the market. I am sure we'll likely see an increase in their operational capacities with the ease of access to funds, which in turn boosts investor confidence and market robustness," Hemant Sood notes.
Looking Ahead
The Unified Lending Interface is more than a new policy—it's a progressive step towards a more inclusive and efficient financial ecosystem in India. "We encourage all stakeholders to stay engaged and informed as ULI reshapes the financial contours of our country," concludes Hemant Sood.
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