The Unified Payments Interface (UPI) has transformed India’s digital payments landscape, and the introduction of Credit Line on UPI brings an exciting opportunity for banks to offer credit directly through UPI apps. This feature allows customers to access pre-approved credit seamlessly for their transactions. As per the Reserve Bank of India (RBI) guidelines, only Scheduled Commercial Banks (SCBs), excluding Regional Rural Banks (RRBs), are permitted to issue credit lines via UPI. Moreover, banks must adhere to responsible lending practices, ensure data security, and maintain transparent communication with customers. This blog explores the strategic advantages and challenges for banks in implementing Credit Line on UPI.

Amit Shah, Chief Business Officer of CARD91, emphasised the significance of this development:

“The rise in Credit Line on UPI reflects a shift in consumer preference for flexible and instant credit solutions. With CARD91’s robust Credit Line Management System, we are empowering banks and fintechs to offer secure, scalable, and efficient credit access to their customers.”

What is Credit Line on UPI?

Credit Line on UPI allows customers to access a pre-approved credit limit directly through UPI apps, offering the convenience of a digital credit card. With this feature, users can simply “scan and pay” without needing a physical card, and complete online checkouts instantly without waiting for an OTP. This streamlines the payment process, enabling quick and hassle-free transactions while making credit more accessible and efficient for users.

A.G Ramakrishna, Chief Product Officer at CARD91, remarked on the potential of this innovation:

“UPI has already redefined how India transacts, and adding credit lines to this system creates endless possibilities. Consumers can now enjoy instant credit for transactions, and financial institutions can offer new products tailored to user needs. CARD91’s platform is designed to support this growing demand seamlessly.”

Key Features

Credit Line on UPI is integrated into UPI apps, giving users immediate access to pre-approved credit without requiring additional applications or cards. The system supports flexible repayment options, including pay-later models and EMIs, offering a user-friendly, fast, and secure experience. Credit limits are personalised to match each user’s financial profile, making the service highly adaptable to diverse customer needs.

Benefits for Banks

1. Attract New Customers: Digital-first customers seeking fast, convenient credit access are more likely to engage with banks offering Credit Line on UPI.
2. New Revenue Streams: Interchange, Interest, fees, and other charges associated with the credit line present new revenue opportunities for banks.
3. Increased Customer Engagement: Offering credit through UPI encourages frequent use, boosting customer engagement and loyalty.
4. Data-Driven Credit Decisions: UPI transaction data enables banks to make better, data-informed credit assessments.
5. Operational Efficiency: The digital nature of the service reduces manual processes, lowering operational costs.

Challenges for Banks

1. Credit Risk Management: Banks need robust systems to conduct real-time credit checks and prevent fraud.
2. Regulatory Compliance: Strict adherence to RBI guidelines on responsible lending and transparent customer communication is essential.
3. Technology Integration: Banks may require technology upgrades to integrate credit lines smoothly into UPI systems.
4. Customer Education: It’s important to educate users about responsible credit usage and repayment practices to ensure adoption and sustainability.

Strategic Importance for Issuer Banks

Credit Line on UPI is a strategic opportunity for banks to target the growing digital-first customer segment that values speed and convenience. By offering this service, banks can differentiate themselves from competitors and position themselves as leaders in digital financial innovation. Additionally, Credit Line on UPI aligns with financial inclusion goals by providing easy access to credit for underserved populations. As UPI continues to evolve, banks that offer Credit Line on UPI will be well-placed to lead in the future of digital financial services, adapting to changing consumer behaviors and market trends.

Conclusion

Credit Line on UPI offers banks an opportunity to provide fast, seamless, and fully digital credit access to their customers. By ensuring compliance with RBI regulations and focusing on responsible lending, banks can unlock new revenue streams and enhance customer satisfaction.

CARD91’s Credit Line Management System (CLMS) is designed to support banks in launching and managing Credit Line on UPI. With its highly configurable, modular framework, banks can design tailored credit schemes, adapt to evolving business needs, and remain fully compliant with RBI guidelines. CARD91’s platform ensures secure, scalable, and efficient management of credit services, empowering banks to meet the growing demand for instant credit access.

By adopting Credit Line on UPI, issuer banks can drive growth, foster deeper customer relationships, and stay at the forefront of digital payments innovation. With CARD91’s CLMS, banks have all the tools necessary to efficiently implement this transformative service, positioning themselves as leaders in the evolving digital financial ecosystem.

Authored by Astha Bishnoi, Manager – Partnership & Sales at CARD91