Informist, Monday, Nov. 4, 2024

By Krity Ambey and Sagar Sen

NEW DELHI – The government is planning to set up a standardised credit valuation framework and a comprehensive Know-Your-Customer repository to allow for quick loan approvals under the proposed Unified Lending Interface platform, a finance ministry official said.

Envisaged by the Reserve Bank of India as a game-changer for lending like the Unified Payments Interface has been for payments, the Unified Lending Interface platform will offer 'frictionless, end-to-end digital credit' by using data on prospective borrowers from various sources such as land records.

"We will need a standard valuation process for all banks, so they require the same set of data. That can really help in reducing the turnaround time," the finance ministry official told Informist on the condition of anonymity.

To be sure, the government, RBI, and participating financial institutions have significant ground to cover before the platform can be rolled out, the official added, though the central bank launched a pilot project for the unified lending platform in 2023.

Valuation of fixed and movable assets to approve loans currently is a lengthy process that can often run into weeks, with no uniform methodology or framework followed by all lenders of the country. A standard framework, the official said, will at least harmonise the processing time taken by all lenders. "Loans under schemes like Kisan Credit Card and PM Vishwakarma could also be expedited via ULI."

Small business owners and farmers typically require immediate access to small loans for operational support, the official said. As such, streamlining the processing time would be crucial. Aiding this would be the creation of a centralised KYC repository that would enable borrowers to get loans from any institution regardless of their banking history with a certain institution, the official said. Further, the repository may not need to be limited to the Unified Lending Interface and can aid in other banking activities too.

Currently, borrowers must get KYC verification with every lender they engage with. Not only would a centralised KYC repository smoothen this process, but it would also help get rid of any specific requirements that different lenders may have to complete the verification. The KYC repository can follow the DigiLocker model, the official said. End

Edited by Saji George Titus

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