RBI Allows Small Finance Banks To Extend Credit Line On UPI To Customers

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UPI: RBI Allows Small Finance Banks To Extend Credit Line To Customers

In a move aimed at enhancing financial inclusion, the Reserve Bank of India (RBI) has allowed Small Finance Banks (SFBs) to provide credit lines to their customers. This decision is expected to boost access to affordable credit for underserved sections, including small businesses, micro-entrepreneurs, and individuals in rural and semi-urban areas.

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Mohit Bedi, Co-founder & CBO, Kiwi, said, “This is great news for SFBs. Credit on UPI opens up a new business avenue for SFBs, which didn’t previously exist. Many SFBs, like AU Bank, have already found success entering the credit space through credit cards.”

Bedi added that with credit lines on UPI, SFBs can now offer low-cost credit solutions, both in terms of operations and customer acquisition, leveraging their extensive merchant networks in focused locations.

This also provides an excellent opportunity to onboard new-to-bank (NTB) customers. It’s a match made in heaven, Bedi said.

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Pre-Sanctioned Credit Lines on UPI

Pre-Sanctioned Credit Lines on UPI is a financial product designed in line with the Reserve Bank of India’s vision to enhance access to credit. This offering allows individuals and small businesses to obtain pre-approved credit lines from banks, which can be instantly utilised for transactions via the Unified Payments Interface (UPI).

By seamlessly integrating credit lines, overdrafts, and retail loans with UPI, this product ensures hassle-free access to funds, making credit more accessible and convenient. It not only promotes economic growth but also strengthens financial inclusion by addressing the immediate financial needs of underserved communities and fostering a cashless economy.

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Small Finance Banks in India are a category of banks established to provide basic banking services, primarily to underserved sections of the population such as small businesses, unorganized sectors, micro and small industries, and individuals in rural and semi-urban areas. These banks are licensed and regulated by the Reserve Bank of India (RBI) under the Banking Regulation Act, 1949.