Banks Need To Step Up To Ensure Success Of ULI, CBDCs: RBI Dy Guv

Reserve Bank of India (RBI) Deputy Governor T Rabi Sankar has reportedly called on the banks to step up and collaborate with the central bank to ensure the success of digital initiatives such as the Central Bank Digital Currency (CBDC) and Unified Lending Interface (ULI).

As per Economic Times, Sankar also said that banks cannot leave such digital initiatives entirely to the RBI. Addressing a conference organised by the Indian Banks’ Association (IBA), he also added that banks should develop a clear framework for collaboration with authorities to trim the time taken to introduce new digital initiatives. 

“It should not just be left to the Reserve Bank. Once we decide that something is a digital infrastructure, all of us should try and get together. If you want to create a forum which will facilitate that, maybe go through the IBA. We need to immediately jump into it and make sure that banks (get into) pilots very quickly and then we can learn,” Sankar reportedly added.

Noting that digital public infrastructure (DPI) created by public bodies with private expertise has paved the way for “quickest solutions”, Sankar added that the process for introducing new digital offerings can be made a lot faster if banks put all their efforts behind RBI initiatives.

On CBDCs, the Deputy Governor said that banks should not view the Digital Rupee as an RBI system, but rather as a DPI, to help it succeed like United Payment Interface (UPI).

“One of the things we were trying to do in CBDC is find out programs which a normal person can use but apart from a couple of them (programs) not much traction has happened. We have to work a little bit harder. Banks need to identify teams which focus on and then develop this,” added Sankar.

India’s CBDC leverages distributed-ledger technology and has been envisaged as a digital alternative to physical cash. In pilot for retail users since December 2022, the CBDCs have seen weak adoption and have been able to achieve a target of 10 Lakh transactions a day, as of December 2023. 

Meanwhile, Sankar also had words of advice for banks on another of RBI’s projects, the Unified Lending Interface (ULI). He believes that ULI could potentially spur specific types of lending as the lending infrastructure has all the information required to make rapid decisions.

“The business efficiency it brings to the banks is so huge that I think we must all put in our efforts and onboard ourselves, find out what use cases can be put to it. The broad message that I want to leave with you is among banks there should be a laid out framework so that all the resources, all the efforts of all the banks are immediately channeled to the extent that is required, of course, so that the process of canvassing this participation that takes months, sometimes years, can be avoided,” he reportedly added.

ULI leverages standardised APIs to help lenders access authenticated data, including Aadhaar, PAN, and land records, from various sources, which can then be used to facilitate loans. In pilot mode since August 2023, ULI has disbursed 7.5 Lakh loans worth INR 38,000 Cr.