Reserve Bank of India (RBI) Governor Shaktikanta Das announced at the Monetary Policy Committee meeting on Thursday that the public can use pre-sanctioned credit lines from banks through the Unified Payments Interface (UPI).
Customers can borrow money in increments to make purchases through QR codes instead of using credit cards. As long as the credit line remains open, the borrower can repay the amount and borrow again.
This move is expected to revolutionise the way we make payments in India, making it more accessible, convenient, and secure than ever before. With the inclusion of credit lines, UPI transactions will become more flexible, allowing users to access credit on the go and meet their financial needs more efficiently.
Let’s take an example to understand this better. Imagine you want to buy a new laptop but don’t have the funds available in your bank account. With the new UPI expansion, you can now use your pre-sanctioned credit line at the bank to make the purchase via UPI. This not only saves you the hassle of going through a lengthy loan application process but also provides a seamless payment experience.
“At present, UPI transactions are enabled between deposit accounts at banks, sometimes intermediated by pre-paid instruments, including wallets. 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. The UPI network will facilitate payments financed by credit from banks,” the RBI governor said.
He added that providing access to credit lines through UPI streamlines the point-of-purchase (PoP) experience and opens up avenues to use credit across a much broader merchant base.
Data from the National Payments Corporation of India (NPCI) shows that the volume of UPI transactions in FY2022-23 is up 82 per cent and 65 per cent in value compared to the previous fiscal year. Of late, RBI has started several initiatives to improve and expand digital payments in the country.
RBI's Other Initiatives
In 2022, RBI allowed credit card payments through UPI. The RuPay settlement system was the only payment service allowed to participate. Borrowers can use a credit card using the RuPay settlement system to avail of credit from banks.
In the same year, in December, it allowed UPI to block a certain amount with merchants, such as a shopping mall or Netflix, so they can make multiple transactions up to the amount permitted. The limit of only one transaction has been removed, so customers don’t have to open payment applications multiple times.
In the past two months, the central bank also extended the UPI merchant payment facility to inbound tourists from G-20 countries. They will not have to carry large amounts of cash or convert it into local currency. This benefits business in India.
Further, RBI has launched a pilot project to launch QR code-based coin vending machines (QCVM) to facilitate access to rupee coins.
In addition, RBI has launched UPI Lite to allow the processing of transactions offline. You can make debit payments without the Internet, but credit payments need to be done online. With UPI Lite, users don’t need to enter a PIN, but they must first add funds from their bank accounts to the app using the internet, where authentication will also be done.
