Credit on UPI: A new way to pay

The RBI, India’s banking regulator, made a strategic announcement of Credit lines on UPI during the Global Fintech Fest. This initiative offers pre-sanctioned credit lines from banks through UPI, revolutionizing customer access to credit. It not only fosters financial inclusion and innovation but also streamlines the digital banking ecosystem, making it more accessible and efficient for all. Currently banks are allowed to provide pre-approved credit lines for their customers, who can then use these credit lines for UPI payments.

This transforms UPI from a payment rail into a credit ecosystem seamlessly. This would be especially beneficial for small borrowers and business owners, enabling them to effectively manage their working capital requirements & also to avail loans in lesser steps compared to current process.

The Unified Payments Interface (UPI) is a digital payments system that has revolutionized the way people pay in India. UPI allows users to make instant payments to other users using their mobile phones.

Until recently, UPI only allowed users to pay using their bank accounts. However, in June 2022, the Reserve Bank of India (RBI) allowed banks to offer credit on UPI. This means that users can now use their credit cards to make UPI payments.

Benefits Credit on UPI:

Convenience: Credit on UPI makes it easy to pay for goods and services without having to carry cash or cards.
Rewards: Many credit cards offer rewards programs that can save users money on their purchases.
Flexibility: Credit on UPI gives users the flexibility to pay for purchases over time.

To use credit on UPI, users will need to link their credit card to their UPI app. Once their credit card is linked, they can make UPI payments using their credit card just like they would with their bank account.

How to use credit on UPI

To use credit on UPI, follow these steps:

Open your UPI app.
Select the merchant or individual you want to pay.
Enter the amount you want to pay.
Select “Credit card” as your payment method.
Enter your credit card details and UPI PIN.

Your payment will be processed instantly and the merchant or individual will receive the money.

Things to keep in mind when using credit on UPI

Here are a few things to keep in mind when using credit on UPI:

Interest charges: Credit cards typically charge interest on unpaid balances, so it is important to pay your credit card bill on time in full each month to avoid interest charges.
Fees: Some banks may charge fees for using credit on UPI. Be sure to check with your bank to find out about any applicable fees.
Repayment terms: Credit cards typically have a repayment term of 30-45 days. This means that you have 30-45 days to repay your credit card bill without incurring interest charges.

Conclusion

Credit on UPI is a new and convenient way to pay for goods and services. It offers a number of benefits, including convenience, rewards, and flexibility. However, it is important to be aware of the interest charges and fees associated with using credit on UPI.