Pre-Approved Credit Lines Now Available on UPI from Small Finance Banks, Thanks to RBI
Pre-Approved Credit Lines Now Available on UPI from Small Finance Banks, Thanks to RBI
This initiative is designed to provide immediate short-term credit without necessitating a distinct loan application, while also ensuring transparency by requiring clear consent from customers.
The Reserve Bank of India (RBI) has broadened the capabilities of the Unified Payments Interface (UPI) by permitting transactions that utilize pre-approved credit lines from banks. Additionally, the regulator has now authorized Small Finance Banks (SFBs) to provide credit services.
This initiative is designed to provide immediate short-term credit without necessitating a distinct loan application, while also ensuring transparency by requiring clear consent from customers.
Customers must give clear consent prior to accessing a pre-approved credit line via UPI. This measure promotes transparency and safeguards against unauthorized use.
“Under this facility, payments through a pre-sanctioned credit line issued by a Scheduled Commercial Bank to individuals, with prior consent of the individual customer, are enabled for transactions using the UPI System. Banks may, as per their Board approved policy, stipulate terms and conditions of use of such credit lines. The terms may include, among other items, credit limit, period of credit, rate of interest, etc,” says the notification by RBI dated February 12, 2025.
Financial institutions will establish the ‘terms and conditions’ for these credit lines, which will encompass interest rates. If they are priced attractively, these credit-linked UPI transactions may present a more economical option compared to conventional credit cards or personal loans.
To connect a credit line account to UPI, users should first download the UPI application and select ‘Credit Line’ during the registration process.
Next, they will need to choose their issuing bank from the provided dropdown list, after which the Credit Line associated with their mobile number will appear on the screen.
Users can then select and confirm the desired Credit Line account for linking.
