By India Today Business DeskThe Reserve Bank of India (RBI) on Thursday proposed to expand the scope of the Unified Payments Interface (UPI) to allow borrowers to access digital credit lines from banks.
Once this becomes effective, borrowers will be able to access digital credit lines, offered mainly by buy now, pay later platforms, directly through UPI.
It may be noted that UPI is a popular payments platform that currently handles 75 per cent of digital retail payments in India. It has already been used to develop various products and features in line with India’s digitization goals, including the recent permission for RuPay credit cards to be linked to UPI.
What is RBI’s new proposal about?
Currently, UPI transactions are enabled between deposit accounts at banks, sometimes intermediated by pre-paid instruments such as wallets.
RBI said, “It is now proposed to expand the scope of UPI by enabling transfers to/from pre-sanctioned credit lines at banks, in addition to deposit accounts. In other words, the UPI network will facilitate payments financed by credit from banks.”
Under the new proposal, UPI will enable transfers to and from pre-sanctioned credit lines at banks, as well as deposit accounts.
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This means that borrowers will be able to use UPI to make payments financed by credit from banks. The central bank’s proposal to expand the scope of UPI to include credit lines is a positive development for borrowers in India.
This move is expected to make it easier for borrowers to access credit from banks, and reduce the cost of such offerings. The RBI is expected to issue detailed instructions regarding the operation of pre-sanctioned credit lines through UPI in due course.
Rajsri Rengan, India Head of Development, Banking and Payments, at FIS, said, “The RBI’s forward-thinking decision to allow pre-sanctioned credit lines at banks to be accessible through UPI will drive innovation and revolutionize the way customers access credit.”
“We believe this is a significant step towards a more efficient and digital banking ecosystem and will undoubtedly provide a much-needed boost to the industry. The ability to access pre-sanctioned credit lines through UPI will prominently help in the reduction of the time and effort required for customers to secure loans, ultimately driving economic growth and development,” Rengan added.
Harish Prasad, Head of Banking, India, FIS, said, “The RBI announcement to allow access to pre-sanctioned credit lines via UPI is a milestone decision which could reignite the digital lending and BNPL space.”
“With the UPI channel opened up for access to credit lines, the point-of-purchase credit experience becomes seamless and opens up avenues to use credit across a much larger merchant base. This has the potential to drive transformational growth for the BNPL lending sector,” he added.
Kole Prosacco
Irwin Lind
Trace Hane