The Reserve Bank of India (RBI) on Friday decided to expand the scope of pre-sanctioned credit lines on UPI to the Small Finance Banks (SFBs).

Governor Shaktikanta Das while announcing the Monetary Policy Committee (MPC) decision said it is proposed to permit SFBs to extend pre-sanctioned credit lines through the UPI.

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He believed that the credit line on UPI has the potential to make available low-ticket, low-tenor products to ‘new-to-credit’ customers.

The Governor said the 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.

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 Scheduled Commercial Banks. This excluded the Payments Banks, Small Finance Banks and Regional Rural Banks.

The RBI Governor said this move will further deepen financial inclusion and enhance formal credit, particularly for ‘new to credit’ customers.

Pre-sanctioned Credit Lines on UPI is an innovative financial offering developed in alignment with the RBI’s vision to transform customer’s access to credit. This product empowers individuals and small businesses to obtain pre-sanctioned credit lines from banks, which can be utilised immediately for transactions through UPI.

This mechanism facilitates availability and frictionless usage of credit lines, overdrafts and retail loans, fostering economic growth and enhancing financial inclusion.

According to the NPCI, in order to link credit on UPI, users need to download the UPI app from Google Play store, complete the registration journey, and select Credit Line as an option.

Further, users need to select the issuing bank name, basis of the mobile number, update with the issuing bank, and a masked available Credit Line will appear on the screen.