Pre-sanctioned credit lines at bank to come under UPI ambit, says RBI

The Reserve Bank on Thursday proposed to expand the scope of the Unified Payments Interface (UPI) by including pre-sanctioned credit lines at banks within the ambit of the popular payment platform.

UPI is a robust payment platform supporting an array of features. Presently it handles 75 per cent of the retail digital payments volume in India.

The UPI system has been leveraged to develop products and features aligned to India's payments digitisation goals, said RBI Governor Shaktikanta Das while announcing the bi-monthly monetary policy.

"It is now proposed to expand the scope of UPI by enabling transfer to / from pre-sanctioned credit lines at banks, in addition to deposit accounts," he said.

In other words, UPI network will facilitate payments financed by credit from banks. This can reduce the cost of such offerings and help in the development of unique products for Indian markets.

At present, UPI transactions are enabled between deposit accounts at banks, sometimes intermediated by pre-paid instruments including wallets.

The central bank will soon issue detailed instructions in this regard.

Recently, RuPay credit cards were permitted to be linked to UPI.

Commenting on the announcement, A K Goel, Chairman of the Indian Banks' Association (IBA), said expanding the scope of UPI to include pre-sanctioned credit lines at banks is aimed at increasing the coverage of UPI and also increasing the access to institutional credit as UPI is quite popular among the public.

Anand Kumar Bajaj, Founder, MD & CEO, PayNearby said the fast pace evolution of technology is playing a huge role in presenting a great opportunity to solve the broken pieces, fill the gaps and reach inclusion faster.

"The decision to expand the scope of UPI by permitting pre-sanctioned credit lines at banks through the UPI is a positive move. It will lead to ease of accessing credit services for customers, thereby, accelerating the pace of digital banking adoption in the country while enabling financial inclusion," he said.

Dilip Modi, Founder, Spice Money too opined the move will significantly enhance the convenience and accessibility of credit to customers and help in driving financial inclusion to the last mile in Bharat.

"UPI has enabled millions of people to conduct transactions and access services with ease and its impact is felt not only in urban but also in rural areas. We look forward to leveraging this initiative to create innovative solutions that will further empower our customers and help them achieve their financial goals," he said.

According to Mihir Gandhi, Partner - Payments Transformation, PwC India

the development will enable linking of UPI to credit lines that are approved by banks for payment transactions of both secured and unsecured lending products - like personal loan, and working capital loan, subject to current UPI limits.

"Cost of disbursement and usage can be reduced for the bank and the customer to use the credit product. Additionally, there is an opportunity for other card networks to work with banks and develop credit products and offer credit lines which can be linked to UPI for customer usage," Gandhi said.

UPI is an instant payment system developed by the National Payments Corporation of India (NPCI), an RBI regulated entity.

Nearly 400 banks and NBFCs are live on the UPI platform.