SFBs Received RBI Approval to Offer Credit Lines on UPI

February 14, 2025

Current Context: The Reserve Bank of India (RBI) has approved Small Finance Banks (SFBs) to offer pre-approved credit lines on the Unified Payments Interface (UPI) as of February 12, 2025. 

  • This move allows SFB customers to access short-term credit instantly through UPI, similar to how they use linked bank accounts or credit cards. 
  • Customers must provide explicit consent before utilizing these credit lines, and banks will set terms such as credit limits, repayment periods, and interest rates based on their policies.
  • This initiative aims to provide seamless access to credit, reduce the need for separate loan applications, and enhance the overall user experience on UPI. 
  • By integrating credit facilities, overdrafts, and retail loans with UPI, the offering streamlines financial transactions and enables immediate access to funds.

Question:

1. What is the key feature of RBI’s new policy allowing Small Finance Banks (SFBs) to offer pre-approved credit lines on UPI?
a)Customers can access credit through UPI only if they have a credit card
b) Customers need to submit a separate loan application for each credit request
c) Customers can instantly access short-term credit after providing explicit consent 
d) Customers must maintain a fixed deposit with the bank to qualify for the credit line 

Answer:c) The RBI’s initiative allows SFB customers to access instant short-term credit via UPI, just like linked bank accounts or credit cards.

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