Good news for UPI users, these banks will give instant loans for small expenses..

After a long wait, major banks like HDFC Bank, Axis Bank, and Kotak Mahindra Bank are now preparing to rapidly expand credit payments through UPI. Previously, banks were distributing RuPay credit cards to increase credit usage on UPI, but now they have also become active in offering direct "credit lines on UPI." This will allow UPI users to make small and large payments on credit without a card.

New Movement in the Credit Line Product
The National Payments Corporation of India (NPCI) launched this feature in 2023, but for two years, no major bank adopted it. Only Karnataka Bank and Suryoday Small Finance Bank, which launched this credit line in collaboration with Navi and Paytm, started it.

Now, for the first time, major private banks like HDFC and Axis are also preparing to launch this product. An ET report stated that these banks are collaborating with fintech startups like Navi and Super.Money, and SalarySe to facilitate easy customer onboarding and conduct first-level verification through the app.

Banks' Hesitation and Now the Green Light
Banks' biggest concerns were how interest would be charged on the credit line, whether there would be an interest-free period, and what the rules would be. This ambiguity held back major banks. However, now it is being reported that all the necessary clarity has been provided by both NPCI and the Reserve Bank. Therefore, banks are moving forward with launching this facility.

How many people have availed of this credit line?

According to industry estimates, approximately 300,000 to 400,000 customers have availed of such UPI-based credit lines so far. While the number of transactions is currently low compared to regular UPI payments, the pace is rapidly increasing as this facility provides people with instant credit for small expenses.

A major opportunity for banks to add new customers
Large banks are seeing this facility as a way to bring new customers into the banking system through such small loans. Fintech companies say that customers who repay small loans on time become strong and reliable customers for the bank in the long run. With the credit option on UPI, banks aim to reach millions of users who make small everyday expenses through UPI and could become a major player in banking services in the future.

Fears of a credit bubble also exist.
Some banks are wary of offering such a large number of small loans. They say that if customers fail to repay the money on time, recovery will be very difficult because these loans are for very small amounts. Therefore, each bank is weighing the risks before fully venturing into this product.

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