The Reserve Bank of India or RBI has approved the operations of allowing banks to offer pre-approved loans via a Unified Payments Interface or UPI. This was announced by Shaktikanta Das, RBI Governor, at a bi-monthly monetary policy committee meeting on April 6, 2023. “Scope of UPI to be expanded, by permitting operation of pre-sanctioned credit lines at banks, through UPI. This will further encourage innovation, the Governor said.
Banks to Offer Pre-Approved Loans Via UPI With RBI’s Permission
“At present, UPI transactions are enabled between deposit accounts at banks, sometimes intermediated by pre-paid instruments including wallets. It is now proposed to expand the scope of UPI by enabling transfer to/from pre-sanctioned credit lines at banks, in addition to deposit accounts. In other words, the UPI network will facilitate payments financed by credit from banks,” said RBI.
“The RBI’s forward-thinking decision to allow pre-sanctioned credit lines at banks to be accessible through UPI will drive innovation and revolutionise the way customers access to credit. We believe this is a significant step towards a more efficient and digital banking ecosystem and will undoubtedly provide a much-needed boost to the industry. The ability to access pre-sanctioned credit lines through UPI will prominently help in the reduction of the time and effort required for customers to secure loans, ultimately driving economic growth and development,” Rajsri Rengan, Head of Department, FIS.
How Will UPI Users Be Benefited From This Decision of RBI?
“Up until now, UPI could be linked to bank debit accounts and RuPay credit cards for making payments. Today’s announcement adds to UPI’s existing benefits and will enable customers to link their credit accounts, including loan accounts, making them accessible for payment via UPI. This will help to simplify customers’ utilization of credit by leveraging the flexibility that UPI has to offer,” Adhil Shetty, CEO at BankBazaar.com
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“With this expansion, UPI customers will now have more flexibility and convenience when managing their money. Users’ access to credit may also become more affordable as a result of banks using UPI’s low-cost infrastructure to offer credit products at lower costs. This is a positive step for the economy as a whole as well, since this will result in boosting digital payments across the country which in turn can result in the development of innovative credit products for the Indian customers,” Karan Mehta, CTO, RING.
