The Reserve Bank of India (RBI) has taken a major step by allowing Small Finance Banks (SFBs) to offer credit lines to their customers.
This decision will help provide easy and affordable loans to underprivileged groups, including small businesses, micro-entrepreneurs, and individuals in rural and semi-urban areas.
The new system, known as the pre-approved credit line on UPI, aims to make loans more accessible to everyday people.
How UPI Credit Lines Work
A UPI Credit Line is a pre-approved credit limit linked to the user’s UPI account. This allows users to borrow money directly into their bank accounts.
The borrowed amount can be repaid either in installments or by the end of the billing cycle.
Steps to Use UPI Credit Line
Loan Based on Transaction History and Credit Score
Users can apply for a loan based on their transaction history and credit score.
Authentication with UPI PIN
To use this facility, users authenticate the transaction with their UPI PIN. After that, payments can be made anywhere using a QR code.
Works Like a Digital Credit Card
The UPI credit line functions similarly to a digital credit card. Customers are given a spending limit, which they can use for transactions.
Application Process
To access this facility, users must first apply at their bank. After approval, they can make payments using UPI even if there is no balance in their account.
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