Those taking small loans are going to get relief soon, because after a long wait, now the facility of credit line is going to start on UPI. Banks plan that small loans should now be transported directly to customers through UPI apps. The Reserve Bank of India has also issued guidelines for this facility. If this scheme really comes on the ground, then the customers will not have to make rounds of banks for small loans.
How will the benefit be?
According to a founder of Fintech sector, banks will offer small credit line on UPI to reach new customers (who do not have bank accounts). For this, apps like PhonePe, Paytm, Bharatpe and Navi will be resorted to. Large banks like ICICI and small banks like Karnataka Bank are also preparing to scale this product.
Green flag from RBI
Banks had asked the Reserve Bank many questions about this new product. Such as interest-free period, reporting outstanding amount and sending information to the credit bureau. Now RBI has given clear guidelines on these issues, after which its test has started at the initial level.
NPCI role
NPCI, which runs the UPI platform, started the pre-management credit line facility in September 2023 itself. But due to technical problems, most banks could not launch it. Now the situation is changing and banks are starting to adopt it. On July 10, NPCI issued a notification to the banks and said that whatever loans should be given in this way, they should be used for the same purpose for which the approval was given.
What kind of loans will be found?
- Gold loan
- Loan against fixed deposit
- Consumer Loan
- Personal loan
That is, the customer’s credit account will be directly linked to the UPI app and small loans can be used from there.
Why is this big step?
Industry experts say that credit will prove to be the next big phase of UPI. Currently, UPI has about 30 million users, out of which 1520 crore are active users. But UPI growth was slowing down for the last few months. In such a situation, the credit line can give it a new speed. Fintech company ZETA, which gives banks backnd infrastructure, estimates that by 2030, UPI may have a 1 trillion transaction.
But the danger also present
According to a senior official of a private bank, if the credit is not implemented carefully, the defaults may increase and the recovery of small loan will become a big challenge.