The Finance Ministry's Department of Financial Services and the Reserve Bank of India (RBI) intend to significantly alter the way credit scores are calculated in India.

This significant adjustment is intended to benefit millions of people who:

Possess a low CIBIL score, or

Need loans while having no credit history (no CIBIL score).

What Was the System Like Until Now?

The primary criterion used by banks and other financial organizations to determine a borrower's loan eligibility is their CIBIL score, which ranges from 300 to 900.

Even if you could pay back the loan, it was hard to receive one if your credit score was poor or nonexistent.

What’s Changing?

The emphasis is now moving to:

Credit score updates in real time (as opposed to monthly or postponed updates)

A thorough evaluation of credit that goes beyond the CIBIL score

This implies that banks will begin considering additional criteria as well, like:

Your present cash flow and income

Payback patterns for smaller loans or unofficial credit

Fresh financial information, particularly for people living in remote or unbanked locations

What is ULI (Unified Lending Interface)?

In the same way that UPI (Unified Payments Interface) transformed payments, a new digital platform called ULI is being developed in India.

ULI will assist banks in determining loan eligibility by gathering and evaluating detailed financial information about people in Real-time, as opposed to facilitating quick money transactions like UPI.
How Will It Work?

ULI will be connected to every kind of bank:

Governmental financial institutions

Individual banks

Cooperative and rural banks

Through this single system, banks will have access to:

The property records of an individual

History of loans

Details on farming or crops (for farmers)

Digital transactions (such as sales, revenue flows, UPI usage, etc.)

Since all of this information will be in one location, loan evaluation will be quicker and more equitable.

Why It's Revolutionary, Particularly for India's Rural Communities

Millions of rural residents, such as

Farmers

Small business owners

Gig workers (such as freelancers and delivery agents)

Internet vendors

Because they have never taken out a formal bank loan, they frequently lack a CIBIL score.

Banks had previously denied them loans because they had no credit history.

Because of ULI, banks will now be able to evaluate additional measures of financial stability including:

Typical online transactions

Paying bills on time

Productivity in farming or ownership of property

Profits from internet sales or gig labor

Future Plans: Framework for Rural Credit Scores

Additionally, a "Rural Credit Score Framework" is being tested to assist ULI. It's a mechanism that determines a villager's creditworthiness without using conventional credit scores.

Even first-time borrowers in rural areas will find it easier to qualify for loans once it is completely implemented.

The main advantages of ULI and the new credit system are:

Loans for those with bad or no credit

Loan approvals that are quicker and more transparent

Inaccurate credit reporting is prevented by real-time data.

Farmers, small enterprises, and gig workers are all part of the official credit system.

Credit choices are not solely based on past borrowing, but also on present behavior.

No More Worries of Credit Score: Quick Guide of Updated Real Time RBI System

Author: Ufaq Ahmed Ansari