The Reserve Bank of India (RBI) has introduced a new initiative allowing Small Finance Banks (SFBs) to offer credit lines to their customers.
This move is expected to benefit small businesses, micro-entrepreneurs, and people in rural and semi-urban areas by providing easy and affordable loans.
The new system, called the Pre-Approved Credit Line on UPI, aims to make borrowing simpler and more accessible for everyday users.
What is a UPI Credit Line?
A UPI Credit Line provides users with a pre-approved credit limit linked to their UPI account. It allows customers to borrow money directly into their bank accounts.
1) Borrowed money can be repaid in installments or at the end of the billing cycle.
2) This system works like a digital credit card, giving customers a specific spending limit for transactions.
How UPI Credit Lines Work
A UPI Credit Line is a pre-approved credit limit connected to a user’s UPI account. This allows users to borrow money directly into their bank accounts.
The borrowed amount can be repaid either in parts or by the end of the billing cycle.
How to Use the UPI Credit Line
Loan Eligibility
Users can apply for a loan based on their transaction history and credit score.
Works Like a Digital Credit Card
The UPI credit line works like a digital credit card. Users are given a spending limit, which they can use for transactions.
Transaction Authentication
To use this facility, users authenticate payments with their UPI PIN. Payments can then be made anywhere using a QR code.
Application Process
Customers need to apply at their bank for access. Once approved, they can use UPI for payments even without a balance in their account.
This initiative is expected to boost financial inclusion and make credit more accessible to underserved communities.
