The Reserve bank of India (RBI) has announced that it has allowed small finance banks to offer the credit line on Unified Payment Interface (UPI) in its monetary policy meet (MPC) held on December 06 2024.
Credit line on UPI was launched in September 2023 and was made available to scheduled commercial banks, it has now been decided to permit small finance banks to sanction credit line on UPI, the RBI stated.
This move will further deepen financial inclusion and enhance formal credit particularly for new to credit customers.
According to the RBI press release, “Credit line on UPI has the potential to make available low-ticket, low-tenor products to ‘new-to-credit’ customers. SFBs leverage a high-tech, low-cost model to reach the last mile customer and can play an enabling role in expanding the reach of credit on UPI. It is, therefore, proposed to permit SFBs to extend pre-sanctioned credit lines through the UPI. Necessary guidelines will be issued shortly.”
Adhil Shetty, CEO of Bankbazaar.com said, “The central bank has extended the credit line to small finance banks (SFBs). This simply means that small finance banks can now offer UPI-linked credit facilities to their customers. The move will provide credit facilities to those who bank with smaller institutions and bring more people, especially those in small towns and rural areas where SFBs operate, to access credit digitally and conveniently via UPI. This will boost financial inclusion. UPI allows accessing pre-approved credit for payments instead of using funds from your accounts.”
Important FAQs on credit line on UPI, according to the NPCI
What is credit line on UPI?
According to the NPCI, “Pre-sanctioned Credit Lines on UPI” is an innovative financial offering developed in alignment with the Reserve Bank of India’s vision to transform customer’s access to credit. This product empowers individuals and small businesses to obtain pre-sanctioned credit lines from banks, which can be utilized immediately for transactions through UPI. It facilitates availability and frictionless usage of credit lines, overdrafts and retail loans, fostering economic growth and enhancing financial inclusion.”
How to link credit line on UPI
According to the NPCI website, “Please download UPI app from Google Play store. Complete the registration journey, select Credit Line as an option. Select your issuing bank name from the drop down. Basis the mobile number update with your issuing bank, masked available Credit Line will appear on the screen. Select the Credit Line account which you want to link and confirm. Proceed to generate UPI PIN..”
How can I make payment to an e-commerce merchant using Credit Line on UPI?
The payment process is like the normal UPI payment. Payment can be made for e-commerce merchant either through an Intent or Collect request from the merchant. Select UPI app as payment mode at merchant website /app, login into the app, select the Credit Line account from the drop-down menu, confirm the payment using UPI Pin. Payment confirmation will be displayed, once the payment is done, you will be routed back to the merchant page.
How is repayment managed for the Credit Line?
Repayment terms depend on the issuing bank. Please contact your bank to understand the same and adhere to the repayment schedule and terms to prevent any adverse impacts on your credit score and ensure a smooth credit relationship.
