RBI has approved pre-sanctioned credit lines through the Unified Payments Interface (UPI) network. What does this mean for UPI payments in India? In this article, you can learn all about this new development. This topic is relevant for the IAS exam economy segment.
RBI allows Pre-approved Credit Lines for Payments over UPI
- The Reserve Bank of India (RBI) has declared that people with pre-approved credit lines from banks will soon have the ability to utilize them for payments via the Unified Payments Interface (UPI).
- UPI payments currently allow the use of Rupay cards on UPI and also the transactions between deposit accounts, sometimes using pre-paid instruments such as wallets.
- Once the system of linking UPI to credit lines is put into operation, it will enable customers to use credit products like personal loans, working capital loans, etc. through UPI, subject to current UPI limits.
Impact of this decision:
- The recent reform means that the UPI network can facilitate payments financed by credit from banks, reducing the cost of such offerings and helping in the development of unique products for the Indian markets.
- Banks would be able to offer credit products without issuing physical credit cards or requiring expensive physical acceptance infrastructure.
- This move could also include non-customers whose credit bureau and other information has been analyzed by the banks.
- It will reduce the cost of disbursing and using credit products for both the bank and the customer.
- Other card networks can work with banks to offer credit products that can be linked to UPI, which will enhance the convenience and flexibility of financial transactions and pave the way for further growth of UPI.
- The introduction of pre-sanctioned credit lines is expected to increase transaction volumes and provide a more seamless user experience, thereby boosting the adoption of digital payments across the country.
Pre-approved credit line:
- A pre-approved credit line is a predetermined amount of credit that a financial institution, such as a bank or credit card company, is willing to extend to a borrower before they actually apply for a loan or credit card.Â
- This type of credit line is typically offered to individuals who have a good credit score and credit history, and who meet certain other criteria established by the lender.
RBI allows Pre-approved Credit Lines for Payments over UPI:- Download PDF Here
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| RuPay Card | National Payment Corporation of India (NPCI) | ||
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