To understand how this works, let’s break it down into key steps:
Eligibility and Pre-Sanctioned Credit: First, individuals and businesses must be eligible for pre-sanctioned credit lines. These credit lines are typically offered by banks and financial institutions based on the applicant’s creditworthiness, financial history, and other relevant factors.
Linking UPI with Credit Line: Once eligible, users can link their UPI-enabled bank account or mobile wallet with their pre-sanctioned credit line. This linkage allows for a seamless and quick transfer of funds when needed.
Transaction Initiation: When users initiate a transaction through UPI for which they require additional funds beyond their account balance, the system checks if they have an available pre-sanctioned credit line. If so, it automatically disburses the required amount from the credit line to complete the transaction.
Repayment and Interest: Users are required to repay the borrowed amount along with any applicable interest or fees within the specified timeframe. The terms and conditions of the credit line, including the interest rate and repayment schedule, are agreed upon during the credit line’s sanction.
Source:- the times of india
Flexibility and Convenience: This new system offers users the flexibility to access credit on-demand without the need to apply for a loan each time they require funds. It simplifies the borrowing process and streamlines financial transactions.
Source:- bussines today
Risk Management: Lenders and financial institutions monitor the usage and repayment behavior of individuals and businesses with pre-sanctioned credit lines. This helps in managing risk and ensuring responsible lending practices.
Overall, the RBI’s move to allow pre-sanctioned credit lines through UPI enhances financial inclusion and makes it easier for individuals and businesses to access credit when needed. It also encourages the responsible use of credit and fosters the growth of digital payment ecosystems in India.
Share your views in the comments
