No More CIBIL Checks? New Credit Initiative Promises Faster Loans, Wider Access

The process of checking CIBIL scores before approving loans may soon change. The Department of Financial Services (DFS), under the Ministry of Finance, is working to scale up the Unified Lending Interface (ULI), a new digital lending system that could reduce reliance on traditional credit scores.

Currently, banks and financial institutions primarily depend on Credit Information Bureau (India) Limited (CIBIL) scores to assess an applicant's creditworthiness. However, with ULI, the aim is to create a more streamlined and inclusive lending process.

To ensure faster implementation, the DFS has instructed all financial institutions to review ULI adoption on a monthly basis. Those that haven't yet joined the system have been told to take immediate steps in that direction.

According to an statement issued by the Ministry of Finance, on June 23, DFS Secretary M Nagaraju and Reserve Bank of India officials met with representatives from various central and state ministries to discuss the nationwide rollout of ULI. The goal is to make loan processing faster, more efficient, and less dependent on traditional credit bureaus. 

If implemented successfully, ULI could bring a major shift in how loans are approved in India, making the system more accessible to a wider range of borrowers. 

What is Unified Lending Interface (ULI)?

According to the Ministry of Finance, the Unified Lending Interface is a digital platform designed to simplify lending processes by integrating technology, data, and policy. It enables lenders to access high-quality, verified data from government ministries and departments, facilitating faster and more inclusive credit delivery.

Key Features of ULI

• Frictionless Credit Delivery: Streamlines loan disbursement processes, reducing time and effort required for credit appraisal.
• Consent-Based Data Sharing: Borrowers can grant lenders permission to access their financial and non-financial records, expediting loan processing.
• Standardised APIs: Enables seamless data exchange between financial institutions, eliminating extensive technical integration.
• Alternative Data Evaluation: Uses non-traditional data sources, such as utility bill payments and GST records, to assess creditworthiness.

Benefits of ULI

• Increased Financial Inclusion: Brings rural borrowers and small businesses into the formal credit ecosystem.
• Improved Transparency: Promotes transparency in financial transactions, reducing fraud and inefficiencies.
• Reduced Loan Processing Costs: Automates and digitises the lending process, minimising paperwork and operational costs.
• Enhanced Credit Access: Simplifies the loan process for MSMEs and farmers, providing timely access to credit.