No Credit Score Needed: Faster Loan Approvals With New Lending System

Getting a loan approved in India may soon be faster and easier because of a new system called Unified Lending Interface (ULI). This digital platform is being developed for all banks and lenders by the Department of Financial Services of the Ministry of Finance. ULI will help speed up loan approvals and will likely be more inclusive than the current method of making credit decisions that relies too heavily on a CIBIL score, which simply indicates a person’s credit history.

Today, banks and lenders rely on a CIBIL score to see if someone is eligible for a loan. A CIBIL score represents how a borrower has managed their loans and repayments in the past. However, under the ULI system, the main consideration will be other ‘data points’ to make credit decisions about the borrower. This system could be used to make credit more accessible to borrowers that may have not built a strong credit history, despite having the ability to pay.

The DFS is working hard to get ULI up and running across the country. On June 23, DFS Secretary M Nagaraju met with officials from the Reserve Bank of India and various ministries to finalize the rollout plan of ULI nationwide. They have requested all financial institutions to track their monthly progress towards implementing ULI and, for those who have not yet gone live, to join the system as quickly as possible. The goal is to make the loan process easier, faster and more equitable.

What is the Unified Lending Interface, or ULI?
ULI is a digital system that leverages verified government data to make lending easier by connecting the banks. The use of technology expedites loan approval times while increasing access to credit for potential borrowers who may have difficultly accessing loans in the current system.

Key Features of ULI
Faster Loan Approvals: ULI eliminates the steps needed to process loans so borrowers can get access to money faster.

Secure Data Sharing: Borrowers can share their financial and other records with lenders so the approval process can be quicker and safer.

Ease of Access to Data: ULI utilizes generic data sharing tools so banks and other entities can share key information easily without special protocols.

New Ways to Check Credit: ULI uses alternatives to credit scores to assess credit worthiness. For example, they may consider utility bill payments, past GST records and/or others.

Benefits of ULI

Helping More People: ULI will help rural borrowers in communities, small businesses, farmers have better access to loans and banking services, bringing them into the formal banking environment.
Clarity and Honesty: ULI eliminates fraud and creates transparency in the loan process.
Less Expensive: ULI reduces the paperwork and costs for a bank and a borrower by automating a majority of the loan process. The loan process may become less expensive and quicker for businesses to obtain funding.
Timely Access to credit: Small businesses and farmers will obtain a loan quicker to meet their needs.

Also Read: EPF Withdrawal Rules Changing: What You Must Know

If ULI is successfully rolled out, it may transform the loan landscape in India to become more accessible and affordable across the board for all types of borrowers from city dwellers to rural farmers.