The Reserve Bank of India (RBI) announced on December 6 that small finance banks (SFBs) can now offer credit lines through UPI, a facility previously limited to scheduled commercial banks.
Introduced in September 2023, the credit line linked to UPI allows users to access pre-approved credit instantly via apps like BHIM, Paytm, and GPay. Developed by the National Payments Corporation of India (NPCI), the feature aims to simplify purchases by enabling payments through a pre-sanctioned credit limit. This initiative promotes financial inclusion, especially for “new-to-credit” customers, according to the RBI.
SFBs serving rural and small-town areas are expected to benefit from this move, offering greater digital access to credit. “This will boost financial inclusion and provide credit access to customers banking with smaller institutions,” said Adhil Shetty, CEO of Bankbazaar.com.
However, users must exercise caution to avoid fraud risks like phishing, unauthorised access, and identity theft. The convenience of quick, paperless loans comes with the need for heightened vigilance in safeguarding financial information.
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