The 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.
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.
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.