What is the UPI credit line? Everything you need to know

The UPI credit line is like a credit card, in that it provides you with access to money you haven't earned yet.

The Unified Payments Interface (UPI) has transformed the way digital payments operate in India, enabling instantaneous transfer of money between accounts based on a mobile number or UPI ID. Now, the system is further evolving with the addition of the UPI credit line, a feature that introduces the force of borrowing into the very fabric of digital transactions on a day-to-day basis. Initiated by the Reserve Bank of India (RBI), this facility is designed to make formal credit more ubiquitous, particularly for users who do not have conventional credit cards or personal loans.

What is a UPI credit line? 

A UPI credit line is an in-principal-approved loan facility from a bank to a customer, which can be accessed directly from UPI apps such as PhonePe, Google Pay, Paytm, and more. Unlike in-principal-approved traditional loans that credit money to your account, this facility enables you to withdraw from a pre-approved credit limit and pay back using UPI—just as you would do with a savings account.

This allows consumers to use borrowed money to pay for purchases or bills by scanning a QR code or inputting a UPI ID and repay later in accordance with terms. It's a convenient, flexible, and digital method of using credit for daily transactions.

How is it distinct from credit cards or BNPL? 

The UPI credit line is like a credit card, in that it provides you with access to money you haven't earned yet. But unlike a credit card, it does not need to issue a physical card, has less set-up costs, and is tied to your UPI handle directly.

It is also distinct from Buy Now, Pay Later (BNPL) offerings, which are usually offered by fintech startups and restricted to certain merchants. A UPI credit line is provided by regulated banks, with more financial control and wider acceptability wherever UPI is supported.

Who can avail it and how to apply 

At present, only a few banks such as HDFC Bank, ICICI Bank, Axis Bank, and a few others are providing UPI-linked credit lines to targeted customers. You usually require a good credit record or previous relationship with the bank. Pre-approved offers can appear on your bank's app or UPI app screen.

To open the credit line, users can be required to fill out an electronic consent form and accept repayment terms. After approval, the credit line shows up along with your other accounts that are UPI-linked.

Interest rates and repayment terms 

Since this is a type of short-term credit, banks can charge interest on only the amount you use—never on the entire sanctioned amount. Interest rates and tenures are decided by the bank and can depend on your credit profile. Some banks might provide interest-free timelines, while others might enable EMIs on big spends.

While a credit card, this facility does not usually come with such features as reward points or cashback—but it's less expensive, quicker to access, and on India's most popular payment platform.

Why the UPI credit line matters 

The UPI credit line is likely to increase financial inclusion by making it easier for more individuals—particularly those in tier 2 and tier 3 cities—to avail formal credit without the necessity of a credit card. It makes borrowing easier and provides consumers with increased flexibility for small-ticket transactions, bills, or unforeseen circumstances.

It can also result in increased conversion rates for the merchants, as consumers who do not have readily available money can make purchases using borrowed funds. For banks, it provides them with a new niche of digital borrowers at lower operating expenses.
The UPI credit line is a big leap for India's move towards cashless, credit-based digital payments. It closes the gap between savings and credit by making borrowing in the short term easy and very much accessible. With more banks and consumers coming on board, it has the potential to revolutionize how Indians consume, borrow, and repay—within India's very own trusted UPI framework.