Indian cenbank proposes expanding UPI digital payments system to allow credit


Mumbai (Reuters) – The Reserve Bank of India (RBI) is proposing expanding the reach of the popular Unified Payments Interface (UPI) digital payments system by allowing credit to be offered via pre-approved bank lines.

UPI is an instant real-time payments system that allows users to transfer money across multiple banks without disclosing bank account details.

“UPI, which currently involves transactions between deposit accounts or wallets, will now expand further to credit lines given by banks,” RBI deputy governor Rabi Sankar said at a press conference after the central bank’s monetary policy decision.

The move could potentially reduce the number of cards held by a customer, Sankar added.

UPI’s popularity is seen to have reduced the usage of cash and debit cards for daily transactions.

It recorded 8.65 billion transactions in March, amounting to 14.05 trillion rupees, its highest-ever since inception, data from the National Payments Corporation of India showed.

“The RBI’s latest move is likely to increase the use case for UPI and allow banks to experiment with products and reduce the cost of offerings,” said a senior banker at a large state-run bank.

It will be a “huge disruptor” for both the credit card market and the buy-now-pay-later segment, the banker added. They did not wish to be named as they were not authorised to speak to the media.

In a bid to boost digital payments, the RBI recently allowed RuPay credit cards to be linked to UPI. This was to enable customers to link their credit cards and pay via UPI.

However, this did not “move the needle” for private sector banks, as most credit cards they issued were on the Visa and Mastercard settlement systems, said Shivaji Thapliyal, head of research and lead analyst at YES Securities.

With pre-sanctioned credit lines now proposed, private sector banks can now simply offer credit card-like products to anyone who has a UPI relationship with the bank, Thapliyal added.

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