Credit line on UPI: From RuPay cards to pre-sanctioned loans—how it works and what users need to know — SkimNews
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- NPCI's UPI Consolidated Circular, released on 18 September, laid out the framework for using both interest-free and interest-bearing pre-sanctioned credit lines as a source of funds across UPI payments.
- Eligible UPI users can connect a pre-approved credit facility to a UPI app and tap it at checkout — for example, a ₹50,000 pre-sanctioned credit line can be used directly for an eligible UPI payment, with repayment governed by the credit facility's terms.
- Credit on UPI is split into two broad categories — interest-free and interest-bearing — and the cost of borrowing depends on the specific credit facility, so users cannot assume every credit-backed UPI transaction is interest-free.
- The framework permits credit on UPI across merchant payments, EMI transactions, UPI AutoPay, and UPI Reserve Pay, subject to the credit line type and the issuer's conditions.
- Members and UPI application providers have a 15 December 2026 deadline to standardize the account subtype and account reference number to harmonize user experience and enable scalable adoption of Credit on UPI.
- The facility is not entirely new: RuPay credit cards can already be linked to UPI for eligible merchant payments, and credit-linked UPI products already exist in the market.
Why it matters: Borrowing at the point of payment blurs the line between spending and debt for millions of UPI users, and the framework's interest-free vs. interest-bearing split means the true cost depends entirely on which credit facility the user's bank or issuer extends. The December 2026 deadline forces banks and UPI apps to harmonize their account structures, which determines whether consumers experience friction or a seamless checkout.
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