The Reserve Bank of India (RBI) seal.
| Photo Credit: REUTERS

The story so far: The Reserve Bank of India (RBI), as part of its strategy to create digital public infrastructure in the country, has announced that a new technology platform called the Unified Lending Interface (ULI) would be introduced by the Reserve Bank Innovation Hub, Bengaluru which will enable friction-less credit to farmers and MSME borrowers to begin with.

What is ULI?

ULI is a platform that facilitates the seamless flow of a customer’s digitised financial and non-financial data from multiple data service providers to lenders, making credit underwriting seamless and customer journeys frictionless for a diverse range of borrowers, according to Rajesh Bansal, CEO, Reserve Bank Innovation Hub. This platform facilitates seamless and consent based flow of digital information, including even land records of various States. This will also bring down the time taken for credit appraisal, especially for smaller and rural borrowers without any credit history. The ULI architecture has common and standardised Application Programming Interfaces (APIs) designed for a ‘plug and play’ approach to ensure digital access to information from diverse sources. This will reduce the complexity of multiple technical integrations besides enabling borrowers to get the benefit of seamless delivery of credit and quicker turnaround time without requiring extensive and time-consuming documentation.

Lenders would gain access to customer data from various silos, including government databases (for example, land records) and satellite imagery through standardised APIs. And FinTechs can gain access to a variety of lenders on one platform and unlock opportunities to provide deeper customer insights.

How will it work?

For first time loan seekers without any credit history or required documentation, availing a bank loan is near impossible. Now with ULI, digital credit information can be made available through a single platform which provides access to data providers and lenders to serve the needs of perspective borrowers.

While ULI facilitates access to data about the loan applicant’s economic activities, it also allows financial sector players to access the data by connecting to the platform through a ‘plug and play’ model. Therefore, the loan applicants need not have to spend weeks to search and secure the documents. Instead the bank, the NBFC or the FinTech would fetch data about the applicant from sources available on the ULI platform.

For a dairy farmer seeking a loan, the lender can find data from the milk cooperative to know about cash flows; land ownership status from land records of States; and insights into his financial condition through farming patterns. So what was once a blind spot for the lender would turn into a visible customer to do business with. With the help of ULI, the lenders can immediately know the income of the loan applicant and credit eligibility. Thus decision making would be automated and loans could be sanctioned and disbursed within minutes.

Tenant farmers who 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 can also avail loans. By programming the end use for purchase of agricultural inputs, the ULI platform can give the required comfort to banks and thus establish the identity of a farmer not through his land holding but through the end use of funds being disbursed.

How did it start?

The RBI had on August 10, 2023 announced the setting up of a Public Tech Platform for Frictionless Credit which is now branded as the ULI. The central bank was of the view that with rapid progress in digitalisation, data required for credit appraisal must be available at a single point for digital credit delivery.

To address this situation, a pilot project for the digitalisation of Kisan Credit Card (KCC) loans of less than ₹1.6 lakh began in September 2022. The initial results of the KCC pilot, which got underway in select districts of Madhya Pradesh, Tamil Nadu, Karnataka, U.P., Maharashtra, were encouraging. According to the RBI, the pilot enabled doorstep disbursement of loans in assisted or self-service mode without any paperwork.

New Delhi:

The Pradhan Mantri Jan Dhan Yojana (PMJDY) which completed ten years of its implementation on Wednesday has had a profound impact on every corner of the country.

The scheme launched in 2014, has proven to be the foundation stone in bringing over 80 per cent of Indian women under the ambit of financial inclusion. A significant boost in the bank account ownership of women in a decade, it has gone up from just 26 per cent in 2011 to 78 per cent in 2021.

Out of the total 53.13 crore Jan Dhan accounts over 30 crore are women’s accounts. Over 35 crore of the Jan Dhan account hail from rural or semi-urban areas. PM Jan Dhana Yojana has diminished the rural-urban divide in terms of bank accounts. The percentage of households that have a bank account or a post office account is now almost the same in urban and rural areas, 95 per cent vs 96 per cent respectively.

PM Jan Dhan Yojana has also bridged the gender gap in access to financial services. The gender gap in accessing financial services was 20 per cent in 2011, and it has been reduced to 6 per cent in 2017 which was less than the Global gap of 9 per cent.

PMJDY has other benefits as well in terms of financial inclusion. As of August 2024, over 36.13 crores of RuPay debit cards are issued without any cost to Jan Dhan account holders. The RuPay debit card is free of cost, it gives an insurance benefit of Rs 2 lakh along with an overdraft facility of up to Rs 10,000 to every cardholder.

The government’s focus on Digital Public infrastructure along with the trinity of Aadhar cards, mobile penetration and Jan Dhan accounts, the JAM trinity has propelled the financial inclusion rate from 25 per cent in 2008 to over 80 per cent of adults in the last 6 years.

PMJDY has been the foundation stone for many more people-centric economic initiatives. Whether it is direct benefit transfers, COVID-19 financial assistance, PM-KISAN, increased wages under MGNREGA, or life and health insurance coverage.

An SBI report in 2021 observed that states with higher PMJDY account balances saw a drop in crime rates and reduced alcohol and tobacco consumption, highlighting the program’s positive social impact.

The Jan Dhan Yojana has garnered global praise for its transformative impact on financial inclusion in India.

In 2023, a G20 report by the World Bank reveals that India has achieved its financial inclusion goals in just 6 years, a feat that would have taken 47 years without its advanced Digital Public Infrastructure.

India has surpassed China in financial inclusion metrics says the SBI report of 2021. Mobile and Internet banking transactions soared to 13,615 per 1,000 adults in 2020, up from 183 in 2015, while the number of bank branches per 100,000 adults rose to 14.7, exceeding those in Germany, China, and South Africa.

India’s account ownership more than doubled from 35 per cent in 2011 to 78 per cent in 2021. All these are because of the government’s various initiatives for financial inclusion.

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

Reserve Bank Governor Shaktikanta Das on Monday (August 26, 2024) said the central bank is constantly working on policies, systems, and platforms to make the country’s financial sector strong, nimble and customer centric.

Addressing the RBI@90 Global Conference on ‘Digital Public Infrastructure and Emerging Technologies’, Mr. Das recalled various initiatives being taken by the RBI with regard to Unified Lending Interface (ULI) and Central Bank Digital Currency (CBDC).

The Governor also said that the UPI system has the potential to evolve into a cheaper and quicker alternative to the available channels of cross-border remittances and “a beginning can be made with small value personal remittances as it can be quickly implemented”.

According to the Economic Survey tabled in Parliament in July, remittances to India, the second largest source of external financing after service exports, are projected to grow at 3.7% to $124 billion in 2024 and at 4% to reach $129 billion in 2025.

Mr. Das said the Reserve Bank of India is looking forward to the journey towards RBI@100 with considerable optimism.

“We are constantly working on devising policies, approaches, systems and platforms that will make our financial sector stronger, nimble and customer centric,” he said.

Speaking on the theme of DPI and emerging technologies, he said over the last decade, the traditional banking system has undergone an unprecedented technological transformation.

By all indications, this process is likely to become even more intense in the coming years, he added.

He said DPI spurs market innovation by reducing transaction costs, democratising access, maintaining competition through interoperability, and attracting private capital.

Referring to the country’s experience, Mr. Das said “DPI has enabled India to achieve, in less than a decade, levels of financial inclusion that would have otherwise taken several decades or more”.

Digital Public Infrastructure refers to basic technology systems, created mainly in the public sector, which are openly available to users and other developers.

India’s DPI journey is a unique model, wherein the base technical infrastructure is built, operated and managed in the public sector, while the private sector accesses the DPI to create innovative customer facing services.

“The advantage of developing DPI in the public sector is that typically the private sector would be averse to capital investment to create infrastructure with uncertain returns,” the Governor said and added that privately created infrastructure may not also be amenable to democratised access or interoperability.

The Governor talked about India’s advancements in the field of digitalisation of the financial services.

He further said Unified Payments Interface (UPI), a real-time payment system, has emerged as a robust, cost-effective and portable retail payment system and is attracting active interest across the globe.

“Continuing on this journey of digitalisation of banking services, last year we launched the pilot of a technology platform which enables frictionless credit. From now on, we propose to call it the Unified Lending Interface (ULI),” he 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.

He said that by digitising access to the customer’s financial and non-financial data that otherwise resided in disparate silos, ULI is expected to cater to large unmet demand for credit across various sectors, particularly for agricultural and MSME borrowers.

Based on the experience from the pilot project, Mr. Das said a nationwide launch of the ULI will be done in due course.

“Just like UPI transformed the payments ecosystem, we expect that ULI will play a similar role in transforming the lending space in India. The ‘new trinity’ of JAM-UPI-ULI will be a revolutionary step forward in India’s digital infrastructure journey,” he said.

On artificial intelligence (AI) and DPI, Mr. Das said for customers, AI enables hyper-personalised products and faster, more relevant services, while for financial institutions like lenders there are benefits from advanced tools for risk and fraud management, streamlined operations, and reduced compliance costs.

“Such advancements, however, come with serious challenges. Data privacy concerns arise from handling vast volumes of personal information. Ethical AI governance is essential to ensure fairness and prevention of bias,” he said.

He further said AI technology can also be misused to spread misinformation, potentially causing severe damage and disruption to DPIs as well as other digital systems. They can also damage the reputation and operations of financial institutions.

“AI promises to make processes simpler and efficient. It can also emulate decision-making to a great extent. However, when it comes to the regulated financial institutions, there should be careful adoption of AI in critical decision-making segments, for example in loan sanctioning,” Mr. Das said.

Mr. Das also said with the emergence of fast payment systems across countries and experimentation around central bank digital currency (CBDC), new possibilities are opening up to bring in greater efficiency to cross-border payments.

Maximum efficiency gains in such initiatives would come from ensuring interoperability as a key design element, the Governor said.

UN General Assembly President Dennis Francis has said India’s trajectory exemplifies that Digital Public Infrastructure (DPI) is a fundamental driver of social transformation and progress and facilitates equal opportunities if accessed in an inclusive way.

“Just as physical infrastructure is essential for economic growth, digital public infrastructure has emerged as a fundamental driver of social transformation and progress. If accessed in an inclusive way, it facilitates equal opportunities in every aspect of our lives. The trajectory of India exemplifies this,” Mr. Francis, President of the 78th session of the UN General Assembly, said.

Mr. Francis was addressing the first conference at the United Nations on ‘Citizen Stack: Digital Public Infrastructure, Transformative Technology for Citizens’ organised in New York on April 25 by the Permanent Mission of India to the UN together with the Ministry of Electronics and Information Technology.

Assimilating India’s first principle of Vasudhaiva Kutumbakam, India Stack shared its DPI journey through the inaugural conference.

Closing the digital divide

Mr. Francis told the conference, attended by top UN leaders, diplomats, think tanks and civil society organisations, that during his visit to India in January this year, he had “the privilege to observe how the rapid expansion of DPI in India has broadened access – thereby enabling millions, who previously operated either on the fringes of the economic system or outside of it, to achieve financial independence and prosperity.”

He noted that in just seven years, India’s DPI model has achieved over 80% financial inclusion for its citizens, and now accounts for more than 60% of all digital transactions worldwide.

“This model has effectively dismantled numerous barriers – enhancing accessibility and affordability in the financial sector. Models like the Citizen Stack should be embraced and replicated across countries in the Global South – supporting and empowering people, particularly the most vulnerable in our communities; in the true spirit of leaving no one behind,” he said.

He said that while the advancements in digital connectivity must be celebrated, there is a need to acknowledge that approximately three billion people — or 37% of the world’s population — have never used the internet.

In this regard, with the ambitious Inter-Governmental process of developing a Global Digital Compact underway as part of Summit of the Future in September, he said, “We have an opportunity to close the digital divide and expand digital infrastructure for a third of the global population.”

India a ‘global leader’

UN Development Programme Administrator Achim Steiner noted that India has become a “global leader” in harnessing technology.

He said. “We need to think of DPI, a term that during (India’s) G20 Presidency…Prime Minister (Narendra Modi) and many across India have really socialised in an international context because much of what explains India’s remarkable journey is an appreciation that you need a digital public infrastructure.”

“Today, not just the fibre optic cable, you need more than that, you need a DPI. And here, we in the United Nations Development Programme, as part of our overall attempt to learn from across the globe are very much aligned with first of all embracing this concept of digital public infrastructure,” he said.

“I think your choice of Citizen Stack also signals something else – for quite a while in the digital universe, the frontier of many of the services, we were called users. But in today’s world, we realise that digital is transforming every aspect of our lives. Therefore, we are not just users. We are digital citizens,” Mr. Steiner said.

UN Secretary-General Antonio Guterres’s Envoy on Technology Amandeep Singh Gill, in his virtual address, thanked India for bringing the world to a new consensus on DPIs through the adoption of the G20 DPI framework. “We have now an opportunity at the Summit of the Future, through the Global Digital Compact, to take that consensus to the next level,” Mr. Gill said.

He underlined the importance of gatherings like the Citizen Stack conference in bringing together experience from leaders of DPI from India, Bangladesh, Rwanda, Estonian, Brazil, Jamaica and many other countries around the world who are successfully leveraging DPI to transform the society and turbocharge their economies.

A concept note on the event said that the India Stack (India’s Citizen Stack) is a ‘sum-of-parts’ technology platform that despite being privately provisioned is publicly owned infrastructure and delivers a gamut of citizen services encompassing digital identity, payments and open networks that enable other innovations using this as a national digital spine.

Digital Public Infrastructure (DPI) is set up in India as a Public-Private Policy partnership that has become a benchmark for multiple nations, corporations & start-ups across the world, the concept note said.

India Stack has created a nation of 1.4 billion digitally and financially included citizens, an increase of bank penetration from 7 per cent to 80 per cent in just 7 years (which typically takes 47 years to achieve) leading to over 60% of all digital transactions globally.

The event is a continuum to India’s G20 Presidency in 2023 and will showcase notable instances from the Philippines & Ethiopia who, while having traversed a different path, have essentially arrived at the same national outcome, the note said.

India’s Finance Minister announced a new scheme to develop deep tech for defence purposes while presenting the Interim Budget for 2024-25.
| Photo Credit: SHIV KUMAR PUSHPAKAR

For tech-savvy youth, a corpus of ₹1 lakh crore will be established with 50-year interest free loans for providing long term financing or refinancing with long tenures and low or nil interest rates, announced Finance Minister Nirmala Sitharaman while presenting the Interim Budget for 2024-25.

“This will encourage the private sector to scale up research and innovation significantly in the sunrise domains,” she added.

The Finance Minister also said that a new scheme will be launched to develop deep tech for defence purposes.

On electric vehicles, she informed Parliament that government will expand and strengthen the sector through greater manufacturing and charging infrastructure.

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The government has allocated ₹1,500 crore for setting up semiconductor fabs in India under the Modified Scheme, she said.

Counting the achievements of Union Government, the FM said that the Skill India Mission has trained 1.4 crore youth, upskilled and reskilled 54 lakh youth. She added that 3,000 new Industrial Training Institutes (ITIs) were opened.

Nirmala Sitharaman informed that in the last ten years 7 Indian Institutes of Technology (IIT), 16 Indian Institutes of Information Technology (IIIT), 7 Indian Institutes of Management (IIM), 15 All India Institute of Medical Sciences (AIIMS) and 390 Universities have been set up in the country.

She briefed that ₹34 lakh crore worth of Direct Benefit Transfer (DBT) has been achieved in the last decade, and it saved ₹2.7 lakh crore of government as a result.

More than 1360 Agricultural Produce Marketing Committees (mandis) have been digitised, doing a business of 3 lakh crore, she told.

FM informed the house that Digital Public Infrastructure (DPI) has been instrumental in formalisation of the economy.

“Technological advancements are transforming lives and businesses, creating new economic opportunities,” she said.

The G20 Declaration has welcomed the ‘G20 Framework for Systems of Digital Public Infrastructure’, recognising the role of DPI in the delivery of services at a societal scale, and underlined the commitment to work together to promote cooperation on international governance for Artificial Intelligence (AI).

Union Minister Rajeev Chandrasekhar described the Declaration as a “tremendous achievement”.

“India’s #G20 Presidency is going to leave an indelible impression on the world order as we move forward,” Chandrasekhar, Minister of State for IT and Electronics, said in a post on X.

The G20 leaders on Saturday stressed promoting international cooperation and further discussions on international governance for AI and called for a safe, secure, trusted, accountable and inclusive digital public infrastructure (DPI) for service delivery and innovation.

Recognising the role of DPI in the delivery of services, the G20 New Delhi Leaders’ Declaration backed the ‘G20 Framework for Systems of Digital Public Infrastructure’, a voluntary and suggested framework for the development, deployment and governance of DPI.

The G20 Declaration asserted that safe, secure, trusted, accountable and inclusive DPI, respectful of human rights, personal data, privacy and intellectual property rights can foster resilience and enable service delivery and innovation.

The New Delhi Declaration is seen as a significant victory for India’s G20 presidency. Its adoption highlighted that members have successfully clinched a consensus amid increasing tensions and divergent views over the Ukraine conflict. The G20 Declaration draws attention to building safety, security, resilience, and trust in the digital economy.

“To this end…we welcome the G20 Framework for Systems of Digital Public Infrastructure, a voluntary and suggested framework for the development, deployment and governance of DPI,” it said.

The declaration talks of building safety, security, resilience and trust in the Digital Economy, fostering digital ecosystems, and harnessing AI responsibly for ‘Good and for All’.

“To unlock the full potential of AI, equitably share its benefits and mitigate risks, we will work together to promote international cooperation and further discussions on international governance for AI,” it said.

The Declaration also welcomed India’s plan to build and maintain a Global Digital Public Infrastructure Repository (GDPIR), a virtual repository of DPI, voluntarily shared by G20 members and beyond.

Further, it takes note of the Indian Presidency’s proposal of the One Future Alliance (OFA), a voluntary initiative aimed at building capacity and providing technical assistance and adequate funding support for implementing DPI in LMICs (low, and middle-income countries).

“In our voluntary efforts to make digital public infrastructure interoperable, we recognise the importance of data free flow with trust and cross-border data flows while respecting applicable legal frameworks. We also reaffirm the role of Data for Development,” it said.

On technological transformation and digital public infrastructure, the declaration noted that technology can enable rapid transformations for bridging the existing digital divides and accelerating progress for inclusive and sustainable development.   “Digital public infrastructure (DPI), as an evolving concept and as a set of shared digital systems, built and leveraged by both the public and private sectors, based on secure and resilient infrastructure, and can be built on open standards and specifications, as well as opensource software can enable the delivery of services at societal-scale,” it said.

Put simply, DPI refers to blocks or platforms, such as digital identification, payment infrastructure and data exchange solutions that help countries deliver essential services to their people, empowering citizens and improving lives by enabling digital inclusion. A case in point is the India Stack — the identity system Aadhaar, payment platform UPI and others, all of which have been receiving ringing praises globally.

DPIs are interoperable, open, and inclusive systems supported by technology and provide essential, society-wide, public and private services that play a critical role in accelerating this digital transformation in an inclusive manner.

The Declaration has also emphasised building safety, security, resilience and trust in the digital economy.

An enabling, inclusive, open, fair, non-discriminatory and secure digital economy is increasingly important for all countries and stakeholders while respecting applicable legal frameworks.

“We will share our approaches and good practices to build a safe, secure and resilient digital economy. To this extent, we…welcome the non-binding G20 High-level Principles to Support Businesses in Building Safety, Security, Resilience, and Trust in the Digital Economy…welcome the G20 Toolkit on Cyber Education and Cyber Awareness of Children and Youth,” it said.

It reaffirmed commitment to G20 AI Principles (2019) and endeavour to share information on approaches to using AI to support solutions in the digital economy.

“We…Will pursue a pro-innovation regulatory/governance approach that maximizes the benefits and takes into account the risks associated with the use of AI,” it said.

It also pledged to “promote responsible AI for achieving SDGs”.

On harnessing AI responsibly for Good and for All, the Declaration said the rapid progress of AI promises prosperity and expansion of the global digital economy.

“It is our endeavour to leverage AI for the public good by solving challenges in a responsible, inclusive and human-centric manner while protecting people’s rights and safety.

“To ensure responsible AI development, deployment and use, the protection of human rights, transparency and explainability, fairness, accountability, regulation, safety, appropriate human oversight, ethics, biases, privacy, and data protection must be addressed,” it said.

The Declaration resolved to deploy all available digital tools and technologies and spare no effort in fostering safe and resilient digital ecosystems, and ensuring that every citizen on the planet is financially included.

“To support this, we commit to promote responsible, sustainable and inclusive use of digital technology by farmers and an ecosystem of Agri-Tech start-ups and MSMEs…Welcome the establishment of the Global Initiative on Digital Health (GIDH) within a WHO-managed framework to build a comprehensive digital health ecosystem in compliance with respective data protection regulations,” it said.

It also committed to leveraging digital technologies for the protection and promotion of culture and cultural heritage and adopting digital frameworks for the development of cultural and creative sectors and industries. 

(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)