From UPI to ULI (Unified lending interface): India’s next digital infrastructure imperative

• by Anil Gupta, Disha Bhavnani and David Hulme
• Jul 7, 2025
• 4 min

India’s MSMEs face a massive credit gap due to fragmented data systems, lengthy paperwork, and limited digital access. The proposed Unified Lending Interface (ULI) aims to bridge this gap by centralizing data, automating verification, and simplifying credit access—unlocking faster, inclusive financing and powering India’s next wave of economic growth.

Rajesh, a Pune-based manufacturer, watched helplessly as his opportunity to supply critical parts for an order slipped away. Despite his best efforts, he couldn’t get a loan of USD 23,000 (INR 20 lacs) to upgrade his equipment.

With purchase orders in hand, Rajesh approached his bank with confidence. What followed was a labyrinthine process that is familiar to India’s MSME sector. First came the demand for documentation, business registration certificates, three years of financial statements, tax returns, and property documents. Days turned into weeks as bank officials requested more paperwork, such as GST returns, bank statements, project reports, vendor agreements, and compliance certificates, sometimes contradicting earlier requirements. Follow-ups yielded vague responses about “processing timelines.” Meanwhile, his client lost patience and awarded the contract to a competitor with ready capacity.

This scenario repeats daily across India’s MSME landscape, where a significant credit gap persists.

India’s digital revolution, anchored by the JAM Trinity, transformed financial inclusion. The Pradhan Mantri Jan Dhan Yojana added 550 million accounts by April’2025, while UPI processed INR 23.94 trillion across 17.8 billion transactions, connecting 660 banks into its network and revolutionizing digital payments acceptance for small businesses. Despite these achievements, MSMEs face an INR 80 trillion credit gap, with nearly 50% MSME credit demand going unmet. Among 64 million MSMEs, 14% have access to formal credit.

This credit gap stems from structural barriers. Many MSMEs lack comprehensive financial records and don’t have collateral to support the scale of financing they require. The conventional lending process remains characterized by paperwork and waiting periods, particularly for new-to-credit (NTC) borrowers. In contrast, urban enterprises and large corporations secure credit within days through streamlined digital processes and relationship banking, highlighting the disparity in financial access. This gap threatens India’s ambitious economic goals to become the world’s third-largest economy by FY2028.

The primary obstacle lies in fragmented data architecture. Financial institutions, particularly smaller lenders, operate on legacy systems that cannot easily integrate with newer platforms. This creates isolated data pockets, preventing a holistic view of potential borrowers and causing unintentional exclusion. Regional rural banks and cooperatives, the first point of contact for rural borrowers, struggle most with these technological limitations.

Compounding this challenge is the scattered nature of data essential to underwriting loans. Land records remain with state governments, GST data with tax authorities, and banking information within individual institutions. Each data source requires separate integration efforts, creating prohibitive costs for smaller lenders. The consequences are tangible. Loan processing that should take days stretches into weeks as lenders manually collect and verify documents. Small businesses have large opportunity costs when capital isn’t available at critical junctures, leading to the exclusion of “thin-file” and “no-file” borrowers.

Unlike bilateral API banking arrangements or the Account Aggregator frameworks, ULI functions as a centralized technology platform that connects lenders with multiple data sources, whether financial or non-financial, through standardized APIs. This plug-and-play architecture eliminates the need for individual integrations that smaller lenders cannot afford. By consolidating financial data (GST returns, income tax filings) and non-financial information (land records, utility payments) into a unified framework, ULI transforms fragmented data repositories into actionable lending insights. For users, ULI simplifies the borrowing experience. Think of it as the digital equivalent of a marketplace where, instead of comparing different brands of products, borrowers can compare credit offers from multiple financial institutions on a single platform. Users provide basic details and financing requirements, and ULI instantly displays tailored credit options, with details on approved amounts, interest rates, and tenure. Borrowers can select the most suitable offer based on their preferences and receive funds directly into their accounts. This eliminates multiple bank visits, downloading numerous apps, or managing stacks of paperwork, transforming a weeks-long process into a streamlined digital experience.

Its key strength lies in the ability to automate documentation processes. Through digital verification channels including eKYC, and eSign capabilities, ULI can reduce loan processing times from weeks to hours. This efficiency addresses the opportunity costs that borrowers face when capital isn’t available at critical business junctures. ULI enables alternative credit assessment by incorporating diverse data points beyond traditional banking records.

The platform’s interoperability with other DPIs, like the Open Credit Enablement Network and Open Network for Digital Commerce, creates a more robust ecosystem for credit delivery. Smaller lending institutions gain access to sophisticated credit assessment tools previously available only to larger banks. Borrowers receive faster credit decisions based on more comprehensive data. As ULI evolves, its potential to close India’s credit gap will be essential to achieving the country’s economic growth targets and ensuring inclusive financial development.

India’s digital highways are built. Now, we must connect them so that no potential borrower is excluded. By bridging our data silos and streamlining credit access, we can unlock the true potential of India’s entrepreneurial spirit and ensure that our digital revolution truly serves all.

The oped was first published on Hindustan Times on 4th July, 2025