Zerodha’s Co-Founder, Nikhil Kamath recently expressed his support for Unified Lending Interface (ULI) in a post on the social networking site LinkedIn. He talked about how lending as a process can be pivotal in crafting the growth of an individual.
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While appreciating ULI Kamath said that it is a great step in an effort to help the entrepreneurial spirit of India. He further predicted that ULI can bring a much bigger change than UPI (Unified Payments Interface).
He pointed out that a good litmus test for any regulation is whether regulation leads to more activities in the shadow markets. If it does, it is likely bad across all Industries.
He further clarified that he is not promoting indiscriminate borrowing including personal loans, but noted, “There is no reward without risk.”
"The more I think about it, all rewards in life is a factor or risk, the debt-taking ability is also a risk," he wrote.
How Can ULI Support Change?
Kamath claimed that ULI will challenge the traditionally cautious approach of Indians towards borrowing. While the safer side approach might have worked in the past, the changing societal; landscape required a more nuanced, modern lending system, he argued.
He highlighted various challenges within the current lending ecosystem, including complex credit systems, high lending rates, informal lenders, regional disparities and socio-cultural barriers. The Reserve Bank of India (RBI) had introduced ULI a system prepared to streamline and standardise lending.
What is ULI?
ULI is a system that links banks, Non-Banking Financial Companies (NBFCs), fintech companies, and microfinance institutions to enable simple, transparent access to loans for every individual regardless of their background or financial status. Making credit more accessible.
In case an individual needing money turns towards loan sharks, when they fail to get loans from banking systems, ULI is expected to tackle the issue.
Additionally, there has been the rise of fake loan apps committing easy and quick loans with minimum documentation and hidden charges, this either leads to fraud or an unexpected debt cycle.
Kamath also compared Zomato and Swiggy's food aggregator platform with ULI's lending aggregator platform.
Key Features of ULI
ULI utilises data from Goods and Services Tax (GST) records, bank records, mobile payment records, and utility bills to assess creditworthiness, substituting the conventional credit scores.
ULI is expected to escalate the approvals almost instantly for various needs including medical bills, business opportunities, etc.
ULI makes small ticket loans accessible for amounts as low as Rs 10,000.
