RBI allows pre-sanctioned credit lines through UPI

The Reserve Bank of India (RBI) Monday said the Unified Payments Interface (UPI) System will also include pre-sanctioned credit lines issued by banks for transactions.

Earlier, only the deposited amount could be transacted through the UPI System.

On April 6, 2023, the Reserve Bank proposed to expand the scope of the Unified Payments Interface by enabling transfer to/from pre-sanctioned credit lines at banks.

Currently, savings accounts, overdraft accounts, prepaid wallets and credit cards can be linked to UPI.

The scope of UPI is now being expanded by the inclusion of credit lines as a funding account, Reserve Bank said in a circular on 'Operation of Pre-Sanctioned Credit Lines at Banks through UPI'

"Under this facility, payments through a pre-sanctioned credit line issued by a Scheduled Commercial Bank to individuals, with the prior consent of the individual customer, are enabled for transactions using the UPI System," the RBI said.

“Banks may, as per their board approved policy, stipulate terms and conditions of use of such credit lines. The terms may include, among other items, credit limit, period of credit, rate of interest, etc,” the release added.

This can reduce the cost of such offerings and help in development of unique products for Indian markets.

The UPI is a robust payments platform supporting an array of features. Presently it handles 75% of the retail digital payments volume in India. The UPI system has been leveraged to develop products and features aligned to India’s payments digitisation goals. Recently, RuPay credit cards were permitted to be linked to UPI. At present, UPI transactions are enabled between deposit accounts at banks, sometimes intermediated by pre-paid instruments including wallets.

UPI, used for immediate money transfer through mobile devices round the clock, transactions crossed the 10-billion-mark in August. The number of UPI transactions in July was 9.96 billion (996.4 crore) and 9.33 billion in June, PTI reported.