What is Credit line on UPI?

UPI is undoubtedly India’s favorite way to pay online. In the month of January 2024 alone, the UPI ecosystem has processed a whopping Rs. 18,41,083.97 Cr with 550+ banks in the ecosystem. UPI has touched the lives of more than 26 crore Indians.

Until now, UPI payments could be made from savings bank accounts, overdraft accounts, prepaid wallets and Rupay credit cards. Now, the National Payments Corporation of India (NPCI) has launched their latest initiative where customers can make their UPI payments from a pre-sanctioned credit line.

Following NPCI’s move, scheduled commercial banks in India will now be able to offer UPI users the ability to pay on credit via UPI up to a specified limit that is pre-sanctioned. This new channel for lending will enable scheduled commercial banks to offer credit to their customers on a flexible and revolving basis.

The credit lines offered by these banks will be displayed to customers on their PSPs. Once they activate their credit line, they will be able to avail these low-ticket loans, the next time they make a UPI payment.

How will Credit line on UPI benefit customers?

In India, UPI has democratized digital payments. Debit cards are also no longer required to send money online. However, the barrier to obtain credit has still not been removed. The newly-banked population finds it difficult to obtain loans or credit cards since they do not have a history of credit for underwriting.

Though Buy Now Pay Later (BNPL) solutions have made strong inroads, growing at a 12.2% CAGR, their impact has been limited to specific demographics. The user base of BNPL in India has exceeded 100mn+, far more than the credit card user base, but the penetration is still less than half of UPI’s.

Compared to BNPL and other loans, the trust and safety that UPI possesses is unmatchable. The seamless user experience of UPI is also very hard to replicate in other apps. UPI’s transaction history being data-rich will also help the lending banks to assess their credit worthiness.

By availing Credit line on UPI, customers can reduce their dependence on traditional credit sources such as offline money lenders or loan apps with opaque policies and high regulatory and compliance risks, given the recent actions of the regulator. With definite customer journeys and clear terms, Credit line on UPI is a clear win. 

For customers who have been recently inducted into the banking system, the process of obtaining a credit card is still a hassle. With multiple checks and KYCs involved, the lack of a credit history classifies them as a risky customer. Such customers can now not only start using credit but can also build their credit worthiness for bigger loans from traditional banks or even credit cards.

How will it benefit businesses?

Credit line on UPI provides effortless access to credit, resulting in a high inflow of low-ticket retail loans to customers. This increases their purchasing power helping them afford more than they could earlier – directly implying higher sales, and increased average order value.

Credit line on UPI would be the most seamless way for the majority of the population to obtain a loan, easier than BNPL solutions, credit card or EMI options. Hence, the sheer volume of credit lines being extended will positively impact businesses.

How can businesses act on it?

Whether you are an on online or brick-and-mortar business accepting digital payments, partnering with an industry-best payment aggregator can help you successfully collect payments from the Credit line on UPI.

Cashfree Payments has India’s widest BNPL suite with 40+ payment modes. We also provide the industry-best UPI stack that will give you the best possible success rates.

To partner with Cashfree Payments and start collecting payments via Credit line on UPI, you sign up here. We have an industry-best UPI stack that will ensure high success rates and India’s widest BNPL suite with 40+ payment modes and growing.

 If you are already a Cashfree Payments customer, you can contact your account manager to know more about enabling this payment mode. 

How can customers access this credit line?

As of writing this blog, the following banks and PSPs are involved in providing the credit line.

Banks live:

• Axis Bank
• HDFC Bank
• ICICI Bank
• Punjab National Bank
• State Bank of India

Apps live with Credit line on UPI:

• BHIM
• Google Pay
• PayTM
• Payzapp

Please visit the help documentation of your PSP as well as Bank app to understand the exact flow on how to avail the credit line on UPI, since the process is different for each entity.

Cashfree Speaks: An impetus to the online payment space

Providing this new innovation on checkout will be an important contributor in UPI’s drive to bridge the credit gap in India, and deliver greater distribution to end customers. 

We can observe a more creditworthy population over the years and expect everyone to have a transparent and worry-free line of credit easily accessible to them.

This will also mark a jump in UPI transaction volumes and build the case of being the world’s best payment stack. Cashfree Payments enthusiastically welcomes the addition of Credit line on UPI as a payment mode and is looking forward to its speedy adoption by Indians.