Account aggregator framework, ULI, OCEN to redefine credit access to small firms, individuals

Account aggregator framework, ULI, OCEN to redefine credit access to small firms, individuals

Subject: Eco

Sec: Monetary Policy

Context:

Initiatives like the Account Aggregator framework, Unified Lending Interface (ULI), Open Credit Enablement Network (OCEN) would help redefine credit access, particularly for small businesses and individuals, Reserve Bank of India (RBI) Governor Shaktikanta Das said at the Global FinTech Fest 2024.

More on News:

• The Reserve Bank’s regulatory frameworks have facilitated new and innovative businesses to grow in an orderly manner.
• These regulatory initiatives reflect our commitment to support innovation with prudence.
• Collaboration between policymakers, regulators, and innovators was the defining element of India’s fintech journey.
• The success stories in India’s fintech space – like Aadhar, UPI, and Digilocker – were the results of such collaborative efforts.
• Stating that digital technologies had been instrumental in expanding financial inclusion, improving efficiency, and enabling real-time services across the country, India now stood as a global leader in digital payments, a feat achieved by combining proactive policymaking with innovation and technological advancements.

Account Aggregator Network:

• The Account Aggregator (AA) Network is a framework for consent-based financial data sharing that would allow individuals and small businesses to “access, control, and share personal data” with third-party institutions.
• The Draft Data Empowerment and Protection Architecture (DEPA) framework released by NITI Aayog serves as the foundation for AA’s architecture. 

Account Aggregator Network Components:

The financial data sharing architecture has 3 important elements as follows:

1. Financial Information Providers (FIP)
2. Financial Information Users (FIU
3. Account Aggregator (AA)

Unified Lending Interface (ULI):

• ULI is a digital platform that is expected to make the lending process easy.
• It would enable friction-less credit while delivering banking services to farmers and MSME borrowers. 

Features of ULI:

• Consent-Based Digital Access: ULI will provide lenders with digital access to both financial and non-financial data of customers, including land records, through a consent-based system.

Potential Benefits:

• Frictionless Credit: ULI aims to facilitate a smoother lending experience by minimising paperwork, particularly for smaller and rural borrowers.
• Reduced Appraisal Time: By consolidating data from various sources, ULI will minimise the time required for credit evaluation.
• Centralised Data Access: The platform will consolidate financial and non-financial data from multiple sources, making it easily accessible to lenders.
• Focus on Agriculture and MSMEs: ULI is expected to address the large unmet demand for credit in sectors such as agriculture and MSMEs.

Open Credit Enablement Network (OCEN):

OCEN is a framework of APIs designed to streamline and enhance the efficiency of the lending process in India. It facilitates interactions between lenders, Loan Service Providers (LSPs), and account aggregators, simplifying the flow of credit to underserved segments like MSMEs, small shop owners, and rural entrepreneurs.