Context:
The Reserve bank of India to launch Unified Lending Interface platform that will benefir borrowers.
Relevance:
GS3-Indian Economy
Dimensions of the Article:
- About Unified Lending Interface
- About UPI
- Positive Impacts of UPI
- Negative Impacts of UPI
About Unified Lending Interface:
- As a result of digital revolution, India has embraced the concept of digital public infrastructure which encourages banks, NBFCs, fintech companies and start-ups to create and provide innovative solutions in payments, credit, and other financial activities.
- For digital credit delivery, the data required for credit appraisal are available with different entities like Central and State governments, account aggregators, banks, credit information companies and digital identity authorities.
- However, these data sets are in separate systems, creating hindrance in frictionless and timely delivery of rule-based lending.
- Hence, the launch of ULI platform will facilitate a seamless and consent-based flow of digital information, including land records of various states, from multiple data service providers to lenders.
- This initiative will significantly will cut down the time taken for credit appraisal, especially for smaller and rural borrowers.
- The platform will reduce the complexity of multiple technical integrations, and will enable borrowers to get the benefit of seamless delivery of credit, and quicker turnaround time without requiring extensive documentation.
- The ‘new trinity’ of JAM-UPI-ULI will be a revolutionary step forward in India’s digital infrastructure journey
About UPI:
- UPI is an enhanced version of the Immediate Payment Service (IMPS), offering round-the-clock funds transfer for quicker, smoother, and easier cashless transactions. It integrates multiple bank accounts into a single mobile application, consolidating various banking features such as seamless fund routing and merchant payments.
- NPCI manages various payment systems, and UPI stands as the largest among them, including the National Automated Clearing House (NACH), IMPS, Aadhaar-enabled Payment System (AePS), Bharat Bill Payment System (BBPS), and RuPay.
- Prominent UPI applications include PhonePe, Paytm, Google Pay, Amazon Pay, and BHIM, the latter being a government initiative. As part of an agreement, India’s UPI will be linked to Singapore’s PayNow.
- NPCI introduced UPI with the collaboration of 21 member banks in 2016.
Positive Impacts of UPI:
- Ease of usage: Simplified digital transactions via smartphones.
- Financial Inclusion: Access to digital payments for all individuals.
- Decreased Cash Dependency: Curbing illicit transactions and risks.
- Boost to Digital Economy: Promoting digital entrepreneurship and innovation.
Negative Impacts of UPI:
- UPI as Petty Cash Alternative: Growing reliance on UPI for smaller transactions, replacing petty cash.
- Limited Transaction Flexibility: Confusing limits set by various apps and banks impacting transaction flexibility.
- Infrastructure Challenges: Difficulties keeping up with the surge in UPI payments, necessitating infrastructure upgrades.
- Security and Fraud Prevention: Rising cyber threats and fraud risks requiring robust security measures.
-Source: The Indian Express
