Summary:

The Reserve Bank of India (RBI) has permitted small finance banks (SFBs) to offer pre-approved credit lines via UPI, a facility previously exclusive to commercial banks. This move aims to increase financial inclusion and provide credit access to "new-to-credit" consumers, such as individuals and small enterprises. Linking these credit lines to UPI allows for easy access to overdrafts, retail loans, and credit, promoting economic growth and expanding credit availability in underserved areas.

In November 2023, UPI transactions decreased by 7% in volume to 15.48 billion and 8% in value to Rs. 21.55 trillion (US$ 254.49 billion), compared to October’s record. Despite this, credit line transactions via UPI generated Rs. 100-200 crore (US$ 11.81-23.62 million) each month, with the remaining transactions coming via RuPay credit cards. The RBI believes the "credit line on UPI" facility has significant potential to drive financial inclusion and economic activity.

Source: IBEF 

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