RBI allows credit lines through UPI

BENGALURU: The scope of Unified Payments Interface (UPI) is now getting expanded as the Reserve Bank of India (RBI) on Thursday proposed to permit operation of pre-sanctioned credit lines at banks through the UPI.

Experts say this will help borrowers easily use their credit lines to pay vendors. “This initiative will further encourage innovation,” said RBI Governor Shaktikanta Das while announcing the decisions of the bi-monthly MPC meeting.

“UPI has transformed retail payments in India. UPI’s robustness has been leveraged to develop new products and features from time to time,” he said. Recently, RuPay credit cards were permitted to be linked to UPI. This was in addition to the existing facility of linkage of UPI with deposit accounts.

After this move, NPCI (National Payments Corporation of India) and payment aggregators collaborated to support credit transactions on UPI. Currently, UPI handles 75% of the retail digital payments volume in India. “UPI system has been leveraged to develop products and features aligned to India’s digitisation goals. UPI network will facilitate payments financed by credit from banks. This can cut cost of such offerings and help develop unique products,” the RBI said.

Rajesh Sabhlok, MD, Asia Pacific, Vymo, said this move will benefit everyone involved in lending process - the lender, borrower, and borrower’s payees - as they would be connected on the same platform. “This would save time and money for everyone involved. The proposal should be extended to NBFCs that offer revolving credit products to retail and small business customers,” he added.

Experts said this decision will re-ignite digital lending. “This has the potential to drive transformational growth for the BNPL lending sector,” said Harish Prasad, head of banking, India, FIS. RBI has decided to develop a web portal to enable search across multiple banks for possible unclaimed deposits. This will help depositors or beneficiaries in getting back their unclaimed deposits, and as per experts, this is a  forward step towards depositor protection and awareness.

UPI ecosystem

• Currently, UPI handles 75% of retail digital payments volume in India
• UPI enables transactions of about `12 lakh crore per month in value and 26 crore transactions in daily volume
• Recently, RuPay credit cards were permitted to be linked to UPI
• In March, UPI recorded 870 crore transactions
• NPCI recently notified 1.1% interchange fee on UPI payments via prepaid instruments