RBI to allow SFBs to extend credit lines through UPI

Mumbai: The RBI on Friday proposed to allow small finance banks (SFBs) to extend pre-sanctioned credit lines through UPI. UPI is an instant real-time payment system developed by NPCI for transactions through mobile phones.

In September 2023, the scope of UPI was expanded by enabling pre-sanctioned credit lines to be linked through UPI and used as a funding account by commercial banks excluding Payments Banks, Small Finance Banks and Regional Rural Banks.

Credit line on UPI has the potential to make available low-ticket, low-tenor products to “new-to-credit” customers, RBI Governor Shaktikanta Das said.

SFBs leverage a high-tech, low-cost model to reach the last-mile customer and can play an enabling role in expanding the reach of credit on UPI, he said.

“It is, therefore, proposed to permit SFBs to extend pre-sanctioned credit lines through the UPI. Necessary guidelines will be issued shortly,” he said while unveiling the latest bi-monthly monetary policy.

The Governor also said that the Reserve Bank has been deploying traditional as well as new-age communication techniques as a key part of its toolkit to ensure transparency and greater impact of its decisions, explain the rationale behind its decisions, and disseminate various awareness messages to a wider audience.