RBI Policy: Avail funds from banks through UPI as RBI allows pre-sanctioned credit lines

Any additional policy rate hike could have pushed home loan interest rates even closer to the psychological threshold of 10 percent per annum, creating a substantial impact on buyer sentiments and affordability, experts said.

The Reserve Bank of India (RBI) Governor Shaktikanta Das has announced the operation of pre-sanctioned credit lines at banks through unified payments interface (UPI).

Das, on April 6 said that this initiative will encourage innovation.

"UPI has transformed retail payments in India. UPI’s robustness has been leveraged to develop new products and features from time to time," Das said.

Further, highlighting that RuPay credit cards were permitted to be linked to UPI, Das said that the new proposal to permitting the operation of pre-sanctioned credit lines at banks through the UPI will encourage innovation.

Also read: Bank transactions through UPI continues to be free for customers and merchants: NPCI

A credit line is financial borrowing option where borrowers can ask for funds from lenders with flexible options and services.

UPI growth

In March 2023, according to National Payments Corporation of India’s (NPCI) data, UPI recorded its highest ever number of transactions at 8.7 billion. On a year-on-year basis, the real-time payments jumped 60 percent.

Das earlier said that payments through UPI have grown exponentially in the past 12 months with daily transactions crossing 36 crore, which is up 50 percent from 24 crore in February 2022.

"A recent pan-India digital payments survey (covering 90,000 respondents) revealed that 42 per cent of respondents have used digital payments," Das said in March.

Also read: Daily UPI transactions jump 50% to 36 crore: RBI governor

Earlier, during a panel discussion at Moneycontrol's inaugural India Fintech Conclave (IFC), Dilip Asbe, managing director and chief executive officer of NPCI said that UPI has not achieved its potential yet.

"Daily transactions on the unified payments interface (UPI) platform can touch 1 billion in the next three years as UPI hits its full potential, said Asbe, and for a country like India, we should do 10x of what we are doing."

What experts said

Rajsri Rengan, India Head of Development, Banking and Payments, at FIS, said that the new measures will drive innovation and revolutionize the way customers access credit.

"The ability to access pre-sanctioned credit lines through UPI will prominently help in reduction of the time and effort required for customers to secure loans, ultimately driving economic growth and development," Rengan said.

Experts also said that the limited availability of credit has remained a concern, particularly for small and medium-sized enterprises (SMEs) will in some sorts.

"The move that will enable SMEs to access credit in a hassle-free manner. This decision will enable credit availability," said Shashank Sharma, Director, Scoreme Solutions, a fintech company.

Aditya Kumar, chief executive officer, NIRO, a fintech company, said that this new measure of UPI linkage for small credit lines could boost micro-credit.

"A large number of borrowers could enter the formal credit system using credit on UPI as a point of entry. This will undoubtedly drive financial inclusion at scale," Kumar said.

Zarin Daruwala, Cluster CEO, India and South Asia markets (Bangladesh, Nepal and Sri Lanka), Standard Chartered Bank, said: "Allowing the operation of pre-sanctioned credit lines through UPI could help broad-base credit delivery and promote the development of new UPI based revolving credit products.”