The Reserve Bank of India (RBI) has made an important announcement about the UPI system.
They’ve now allowed to show pre-approved loans from banks using transactions in UPI.
Up until now, UPI was mainly used for deposit transactions. But the RBI had proposed expanding UPI’s capabilities back in April.
This expansion includes the ability to transfer money to and from bank-approved loans.
Currently, you can link various accounts like savings, overdraft, prepaid wallets, and credit cards to UPI.
The RBI, through a circular on ‘Operation of pre-approved loan facility in banks through UPI,’ stated that pre-approved loans are now part of UPI.
This means you can make payments using a pre-approved loan provided by a bank, but only with the customer’s consent.
The central bank believes this change will lower costs and lead to unique products in the Indian market.
Now, what is a pre-approved credit line on UPI?
It’s like having a loan limit that you can use whenever you want.
You can think of it as getting a loan and paying it back with interest at a later date. To get this feature on UPI, you’ll need to apply at a bank.
And what does it mean to link your account to UPI?
UPI is a payment system that allows you to connect multiple bank accounts to a single smartphone app.
With UPI, you can transfer money without needing to share things like IFSC codes or account numbers. It’s a real-time payment system, meaning the money is transferred instantly.
