RBI allows pre-approved credit lines for payments over UPI

Individuals with pre-approved credit lines from banks will soon be able to use it to make payments over the Unified Payments Interface (UPI), the Reserve Bank of India (RBI) said, setting the stage for new credit products over the homegrown payments platform.

Currently, UPI payments can be done between deposit accounts, sometimes intermediated by pre-paid instruments including wallets. Last June, the RBI also approved the use of Rupay credit cards on UPI, stoking hopes that it would eventually allow delivery of credit products through the payments mechanism.

RBI permitted transfer of funds to and from pre-sanctioned credit lines. “In other words, UPI network will facilitate payments financed by credit from banks. This can reduce the cost of such offerings and help in development of unique products for Indian markets,” RBI said in a statement. Pre-sanctioned credit lines or pre-approved credit refers to credit that banks approve for customers after analyzing internal data.

UPI currently accounts for 75% of retail digital payments volume in India. In March alone, it recorded 8.7 billion transactions worth Rs. 14.1 trillion, showed data from the National Payments Corp. of India (NPCI).