What Nikhil Kamath Didn’t Tell Us About ULI

In his recent LinkedIn post, Nikhil Kamath, co-founder of Zerodha, likened the ease of the Unified Lending Interface (ULI) platform to ordering food online, hailing it as a game-changer for the lending space. While his analogy certainly grabbed attention, it oversimplified the profound complexities of lending. The ULI, despite its promise of revolutionizing credit access, is not without significant challenges. Kamath’s post ignited debates on LinkedIn, where many raised concerns about whether this platform can genuinely address the structural bottlenecks in India’s credit ecosystem.

The ULI, developed by the Reserve Bank of India (RBI), is often touted as the UPI of the lending world. It consolidates financial and non-financial data, offering lenders access to vital information such as land records, GST data, and even satellite imagery through a plug-and-play API architecture. This enables quicker loan appraisals, particularly for small and rural borrowers, and streamlines processes that traditionally relied on fragmented documentation. By any standard, ULI is an impressive leap in leveraging digital infrastructure to democratize credit. However, borrowing is far more intricate than digital convenience can solve.

The analogy between lending and food delivery misses a fundamental point- lending involves balancing risk, cost, and operational efficiencies—factors that technology alone cannot fully address. Informal lenders like NBFCs, which dominate the rural and MSME credit landscape, face high costs of capital and significant risks, leading to higher interest rates. ULI might ease data access for these players, but it doesn’t reduce their liabilities or incentivize riskier loans. Similarly, while ULI offers banks greater insights into borrower profiles, it does not increase their appetite for lending to high-risk segments. Simply put, the platform may accelerate processes but cannot eliminate the underlying structural hurdles.

Kamath’s post also sidestepped a critical issue: India’s underdeveloped bond market. Currently, only AAA or AA-rated borrowers can tap into bond financing, leaving NBFCs and other informal lenders with limited options for raising affordable capital. Without reforms to enable risk capital for these players, ULI’s impact will be superficial, addressing the “how” of lending without solving the “why” of unmet credit demand.

While ULI has enabled the disbursal of over Rs 38,000 crore in loans across diverse categories, its success is contingent on systemic changes. The platform must be paired with measures to deepen bond markets, enhance regulatory oversight, and foster risk-sharing mechanisms. Without these, ULI risks becoming a powerful tool constrained by a rigid and risk-averse financial ecosystem.

Ultimately, ULI is a step forward—a sophisticated enabler of efficiency. But unless we address deeper structural issues in lending, it will remain an unfinished promise, merely scratching the surface of India’s credit conundrum.