Many times, when we lack money for urgent expenses, we often have to ask shopkeepers for goods on credit.
However, this common issue may soon come to an end.
The National Payment Corporation of India (NPCI) is set to introduce a significant feature for UPI users.
This upcoming facility will allow UPI accounts to function similar to credit cards. Even without sufficient funds in your account, you’ll be able to make UPI payments effortlessly after this feature is launched.
NPCI has announced that users’ UPI accounts will now function like credit cards, with each customer receiving a credit line based on their CIBIL score.
This credit can only be used with merchants, and banks will charge a fixed interest rate in return.
NPCI has already engaged with several private and government banks,
including ICICI Bank, HDFC Bank, PNB, Indian Bank, and Axis Bank, all of whom have agreed to support this initiative.
Shopkeepers’ problems also solved
Not only customers but also shopkeepers stand to benefit from this new facility.
Currently, shopkeepers incur a charge of approximately 2% on payments exceeding Rs. 2,000 made via credit cards.
With the introduction of a credit line in UPI, shopkeepers will no longer need to pay these fees.
However, unlike credit cards where no interest is charged if payments are made promptly, interest will be applicable on UPI credit lines.
Interest only on the amount spent
You won’t incur any interest on the credit line offered through UPI until you start using the funds. Interest will only apply to the amount you actually use, similar to an overdraft facility.
For instance, if you have a credit line of Rs. 20,000 but use only Rs. 10,000, you’ll only pay interest on the Rs. 10,000 utilized.
UPI will be the solution to all problems
It’s surprising to note that the UPI system, launched 8 years ago, has significantly reduced the reliance on debit cards for digital payments.
With the introduction of a credit line in UPI, the use of credit cards is expected to decrease further.
According to Amazon’s report, 53% of online shoppers use UPI for payments, while 25% use it for offline purchases.
Moreover, UPI’s reach has expanded beyond India, now serving customers in 7 countries.
