Turbocharging UPI: Credit lines can be linked now, rules RBI

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You could easily call it a small step for the Reserve Bank of India (RBI) but a giant leap for Indian payment system and customer convenience. The central bank has ruled that the game-changer Unified Payments Interface (UPI) System can henceforth include pre-sanctioned credit lines issued by banks for transactions. So far, one could use only the money deposited for transactions through the UPI System. Only savings and overdraft accounts, credit cards and prepaid wallets can be linked to UPI. Launched on April 11, 2016, UPI has revolutionised the mode of payments in India cutting across geographies and income barriers. Enabling immediate cash transfers securely through mobile phones, its use has zoomed in the country recording as many as 1,000 crore transactions in the month of August alone. The Centre is now pushing for its adoption in several other countries such as France, Bhutan, UAE and some other South-East Asian countries. The RBI’s new measure would increase the use of UPI even further. It was considering the step for the past four-five months. The central bank issued a circular on ‘Operation of Pre-Sanctioned Credit Lines at Banks through UPI’, in which is said that the ambit of the payment system is being increased by including credit lines as a funding option. “Under this facility, payments through a pre-sanctioned credit line issued by a Scheduled Commercial Bank to individuals, with the prior consent of the individual customer, are enabled for transactions using the UPI System,” the bank said. “Banks may, as per their board approved policy, stipulate terms and conditions of use of such credit lines. The terms may include, among other items, credit limit, period of credit, rate of interest, etc,” the release added. Exploiting the multiple objectives of ease, convenience, speed and security, UPI has emerged as the preferred mode of digital payment, cornering as much as 75% of the retail digital payments in the country. Recently, RuPay credit cards were permitted to be linked to UPI. The new step by RBI can help in the development of unique products for Indian markets. The number of UPI transactions in July was tantalisingly close to the 1,000 crore mark by recording 996.4 crore transactions. In June it was at 933 crore, before scaling the 1,000 crore a month summit in August. Experts believe that UPI is far from realising its full potential and the adoption graph would continue to rise.