India’s popular digital payment system, UPI, is set to become even more powerful.
A new change being discussed between banks and the National Payments Corporation of India (NPCI) could allow UPI credit lines to offer an interest-free period, just like credit cards.
This move can make small loans easier, faster, and more affordable for everyday users.
How This New UPI Credit Feature Works
Imagine you need ₹2,000 to ₹5,000 urgently, but your bank balance is low.
With a UPI credit line, the bank gives you a pre-approved limit that you can use directly through your UPI app.
Earlier, interest started accumulating as soon as you spent the money.
This made many users hesitant.
Now, with the proposed interest-free period, you can use the money first and repay it later without paying any interest, as long as you repay within the given time.
Interest-Free Period: A Game Changer
The biggest upgrade is the interest-free window, similar to what credit cards offer.
If you repay the borrowed amount before the deadline, you pay zero interest.
This feature could make UPI credit lines more appealing than credit cards, especially for people who prefer digital payments and short-term borrowing for daily expenses.
A Credit Card Alternative for Many Users
UPI credit lines can be especially useful for people who do not have credit cards.
With easy access, simple repayment terms, and no need for a physical card, this feature brings credit card-like benefits directly to your UPI app.
However, banks will still need to follow RBI rules and observe customer response before rolling it out widely.
What’s the Current Status?
Some banks have already started offering interest-free UPI credit options in limited forms.
Yes Bank introduced a credit line with a 45-day interest-free period, while Suryoday Small Finance Bank offers 30 days of interest-free usage.
These early launches suggest that wider adoption could happen soon.
Why UPI Credit Lines Were Introduced
The UPI Credit Line was first announced by the RBI in April 2023 and officially launched in September 2023.
Its goal was to provide easy access to small credit for individuals and small businesses who don’t have credit cards.
Under this system, users can access a credit limit of up to ₹5,000 through their UPI app and pay no interest at all if the amount is repaid within the specified time.
With this new interest-free feature, UPI could soon become not just a payment tool, but a smart way to manage short-term expenses.
