New Delhi :
During a bi-monthly monetary policy committee meeting on April 6, 2023, the Governor of the Reserve Bank of India (RBI), Shaktikanta Das, announced that the RBI has given approval for banks to offer pre-approved loans through the Unified Payments Interface (UPI).
The Governor stated that this move will expand the scope of UPI and promote innovation. The new policy will allow banks to operate pre-sanctioned credit lines through UPI.
Banks to Offer Pre-Approved Loans Via UPI With RBI’s Permission
According to the RBI, UPI transactions are currently limited to deposits accounts at banks and occasionally involve pre-paid instruments like wallets.
However, the RBI has proposed to broaden the scope of UPI by allowing transfers to and from pre-approved credit lines at banks, in addition to deposit accounts.
In essence, this means that the UPI network will support payments funded by bank credit.
Head of Department at FIS, Rajsri Rengan,
believes that the RBI’s decision to make pre-approved credit lines at banks available through UPI is a forward-thinking move that will promote innovation and transform the way customers access credit.
Rengan views this development as a significant step towards a more efficient and digitally-oriented banking ecosystem that will provide a much-needed boost to the industry.
By allowing customers to access pre-sanctioned credit lines through UPI,
the process of securing loans will become faster and more convenient, ultimately leading to economic growth and development.
How Will UPI Users Be Benefited From This Decision of RBI?
According to Adhil Shetty, CEO at BankBazaar.com, UPI was previously limited to bank debit accounts and RuPay credit cards for making payments.
However, the recent announcement expands on the existing benefits of UPI and allows customers to link their credit accounts, including loan accounts, making them accessible for payment via UPI.
This development simplifies the utilization of credit for customers by taking advantage of the flexibility that UPI provides.
Karan Mehta, CTO at RING, highlights that the expansion of UPI will provide customers with greater flexibility and convenience when it comes to managing their finances.
Additionally, the use of UPI’s low-cost infrastructure by banks to offer credit products could make access to credit more affordable for users.
Mehta sees this development as a positive step for the Indian economy,
as it is expected to boost digital payments throughout the country, leading to the creation of innovative credit products for customers.
