Unified Payments Interface (UPI) has transformed India’s payment landscape, propelling the nation into a cashless era. With over 40% of all payments now happening via UPI, it is evident that this innovative platform has captured the wallets of millions.  

Previously, UPI payments were limited to savings accounts, overdraft accounts, prepaid wallets, and RuPay credit cards.  Now the scope of UPI is expanding with the addition of credit lines as a funding account.  

In a significant move on 4th September 2023, the Reserve Bank of India (RBI) announced the approval of pre-sanctioned Credit Line on UPI. 

This new initiative enables banks to offer credit lines that borrowers can use seamlessly for transactions via UPI. Lenders can also instantly offer flexible borrowing options to a vast user base.  This groundbreaking solution not only enhances the convenience of digital transactions but also empowers both banks and customers with greater financial flexibility. 

This blog will delve into what a credit line on UPI entails, how it operates, and the benefits it brings to businesses and customers.   

What is Credit Line on UPI?  

A credit line on UPI is a pre-approved loan that, once enabled by your bank, can be accessed directly via any UPI app. This feature allows customers to utilize pre-approved borrowing limits offering easy and hassle-free credit access. By integrating this credit line into their UPI accounts, customers can simplify their financial management, reducing reliance on multiple credit cards and digitizing the entire process.  

Key Features of Credit Line on UPI  

• Instant Access to Credit: Seamlessly make payments without waiting for fund transfers. 

• Flexible Repayment Options: Choose to repay the credit amount in full or through convenient installment plans. 

• Secure Authentication: Transactions are secured with a UPI PIN to prevent unauthorized access.  

These features enhance the convenience, security, and flexibility of accessing credit via UPI, making it a valuable financial tool for users.  

How Does Credit Line on UPI Work?  

Step 1: Apply for a Credit Line on UPI  

Visit your bank or apply online to get an UPI credit line, depending on how your bank offers onboarding services. You might want to submit additional documents or consents to your bank for their underwriting process.  

Step 2: Bank Review & Approval 

Your bank will evaluate your application and supporting documents to determine your creditworthiness and offer a credit limit. Once approved, you’ll receive a notification from the bank.  

Step 3: Link to your UPI App 

Once approved, navigate to a UPI app of your choice and add the credit line much like the process of adding your bank account. Simply click on ‘Add Credit Line,’ select your bank, and verify to complete the process. 

Step 4: Start using your Credit Line 

With your credit line linked to UPI, you can begin making payments using the credit line seamlessly. The same credit limit as your bank account will be available for transactions with merchants both online and offline.   

Benefits of Credit Line on UPI  

• Risk Reduction: Real-time UPI transaction data enables banks to make better-informed lending decisions and monitor credit usage effectively.  

• Stronger Customer Loyalty: Offering innovative credit solutions enhances customer satisfaction and deepens relationships.  

• Inclusivity for Non-Credit Card Holders: Access credit without needing a physical card, broadening financial inclusion for a wider demographic.  

• Higher Activation/Consumption of credit: Increased revenue from interest and fees, while strengthening customer relationships and providing valuable data for tailored services. It also enhances the brand reputation, attracts new clients, and offers a competitive market advantage.  

Though credit line on UPI offers numerous benefits for businesses to innovate and refine their financial services, selecting the right tech stack solution provider is essential.   

M2P’s New Age Credit Stack 

M2P serves as your ultimate solution for enabling credit line functionality on UPI that comes along with our unified credit stack. Our platform empowers financial institutions with flexible lending solutions across various channels, ensuring widespread customer access.    

With the ability to distribute credit seamlessly, our platform facilitates higher credit utilization and enables multiple credit lines for different brands and partners. Designed for speed, scalability, and customization, this tech stack stands as the benchmark for credit card operations.   

How does M2P stands out?  

• Multi-form factor distribution (UPI, card network, and closed loop).  

• Supports both secured and unsecured credit lines.  

• Built-in BRE for instant underwriting.  

• Pre-integrated, multi-channel FRM for comprehensive risk mitigation.  

• Issuance of multiple credit lines linking to brands and acquiring partners.  

• Single credit line facilitates both closed and open-loop transactions.  

Credit Line on UPI can also be used for a variety of financial needs. 

Use Cases of Credit Line on UPI  

As the use of credit lines on UPI expands beyond everyday expenses and small-ticket purchases, businesses are increasingly recognizing the untapped potential for more specialized applications: 

Vehicle Loan Financing	Travel Financing	Loan Against Securities
Simplified Application Process:                        Streamline the application process for vehicle loans, making it more accessible to a wider number of borrowers.	Pre-Approved Credit for Travel Expenses:                                 Travelers can use credit lines on UPI to book flights, hotels, and activities without worrying about upfront payments.	Leverage Assets for Credit:                         Individuals and businesses can use their assets, such as property or securities as collateral to obtain credit lines through UPI.
Faster Disbursal:                 Funds can be disbursed directly to the vehicle seller via UPI, accelerating the loan process.	Emergency Funds:                          Offers a safety net for unexpected travel expenses, such as medical emergencies or flight cancellations.	Quick Access to Funds:       Provides faster access to funds compared to traditional loan processes.
Flexible Repayment Options:   Offers flexible repayment terms, such as monthly installments or balloon payments, to suit different financial needs.	Convenient Repayments:                Travelers can conveniently repay their credit using UPI, even while on the go.	Easy Repayment Options:    Borrowers can choose from various repayment terms and interest rates based on their financial situation.

 

M2P’s Credit Line on UPI is a future-ready credit stack which is designed to empower businesses with a comprehensive lending framework, perfectly aligned with the evolving business landscape. 

Ready to empower your business with Credit Line on UPI?  

Get in touch with our experts today

Subscribe to our newsletter and get the latest fintech news, views, and insights, directly to your inbox.

Follow us on LinkedIn and Twitter for insightful fintech bytes curated for curious minds like you.