The Reserve Bank of India (RBI) Governor, Shaktikanta Das announced during the bi-monthly monetary policy committee meeting on 6 April, 2023, that pre-approved credit lines — at banks — could now be operated through the Unified Payments Interface (UPI).
This decision has been taken to encourage further innovation within the sector and expand the scope of the service.
The Governor stated, "We have been making lot of announcements relating to UPI in past policies. UPI’s robustness has been leveraged to develop new products and features from time to time".
"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, UPI network will facilitate payments financed by credit from banks," RBI said.
This can reduce the cost of such offerings and help in development of unique products for Indian markets. Detailed instructions in this regard will be issued separately, the regulator said.
What Experts Said
As per an Economic Times report, India Head of Development, Banking and Payments at FIS, Rajsri Rengan stated, "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 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 reduction of the time and effort required for customers to secure loans, ultimately driving economic growth and development," he added.
According to Harish Prasad, Head of Banking, India at FIS, access to pre-sanctioned credit lines via UPI will re-ignite the digital lending and BNPL space too.
He stated, "With the UPI channel opened up for access to credit lines, the point-of-purchase credit experience becomes seamless and opens up avenues to use credit across a much larger merchant base. This has the potential to drive transformational growth for the BNPL lending sector".
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