UPI New Rule: A new and significant change may be coming to India’s digital payment system. The same UPI platform that made cashless transactions commonplace in the country is now preparing for a major change reg
arding small loans.
According to reports, discussions are currently underway between NPCI and banks. If this proposal is implemented, the credit line taken through UPI could also offer a grace period, similar to credit cards. This means that no interest would be charged if the amount is repaid within the stipulated time. This could increase the challenge for credit card companies.
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What was the problem until now?
Currently, the biggest problem with UPI credit lines is that interest starts accruing the moment the customer makes a payment. For example, if there is no balance in the account and a sudden expense of ₹2,000 or ₹5,000 arises, payment can be made through the UPI credit line, but interest starts accumulating immediately. This is why many people use this facility sparingly.
What changes does NPCI want to make?
NPCI is working towards eliminating this problem. The plan is to provide a fixed interest-free period for UPI credit lines, just like with credit cards. This would mean that customers can spend first and will not have to pay any additional charges if they repay before the due date.
Who will benefit the most?
This change could prove particularly beneficial for those who do not have credit cards or whose credit score is not sufficient to obtain one. The easy process, digital convenience, and instant loans for small amounts could make it a good alternative to credit cards.
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Banks have started experimenting
Some banks have already started adopting this model. Yes Bank is offering up to 45 days of interest-free credit on its UPI credit line. Suryoday Small Finance Bank is offering a 30-day interest-free period. This clearly shows that banks are serious about this new system.
RBI’s role
The idea of a UPI credit line was first proposed by RBI Governor Shaktikanta Das in April 2023. It was formally implemented in September 2023. The aim was to provide easy access to credit for individuals and small businesses who are not fully integrated into the traditional banking system.
With this potential change, UPI will no longer be just a payment method, but could also emerge as a robust digital option for small loans.