News

Published: Apr 7, 2023
Updated: Apr 7, 2023

RBI proposes expansion of UPI to include credit lines

The Reserve Bank of India (RBI) is considering allowing credit to be offered via pre- approved bank lines on the Unified Payments Interface (UPI) digital payments system. UPI is a popular real-time payments system that allows users to transfer money across multiple banks without disclosing bank account details. The expansion of UPI to include credit lines would reduce the number of cards a customer needs to hold. UPI's popularity has already reduced the use of cash and debit cards for daily transactions, with a record 8.65 billion transactions in March, amounting to 14.05 trillion rupees.

Potential for banks to experiment with new products

RBI Deputy Governor Rabi Sankar said at a press conference that the expansion could also increase the use case for UPI and enable banks to experiment with products and reduce the cost of offerings. A senior banker at a large state-run bank said it would be a "huge disruptor" for both the credit card market and the buy-now-pay-later segment. The RBI recently allowed RuPay credit cards to be linked to UPI, but this did not significantly impact private sector banks since most credit cards they issued were on the Visa and Mastercard settlement systems.

Pre-sanctioned credit lines offer new opportunities

Shivaji Thapliyal, Head of Research and Lead Analyst at YES Securities, said pre- sanctioned credit lines would enable private sector banks to offer credit card-like products to anyone who has a UPI relationship with the bank. This move could potentially transform the credit industry and make UPI even more popular for daily transactions.

Move will be prove to be a game changer for the credit industry

The RBI's proposal to expand UPI to include credit lines could significantly disrupt the credit card market and increase the use case for UPI, which has already reduced the use of cash and debit cards. The move would allow banks to experiment with new products and reduce the cost of offerings, making it more attractive for both customers and financial institutions. If implemented, pre-sanctioned credit lines could be a game-changer for the credit industry and strengthen UPI's position as a preferred digital payments system.