After a long wait, major lenders like Axis Bank, HDFC Bank, and Kotak Mahindra Bank are now stepping up to offer credit payments through the Unified Payments Interface (UPI). While the banks already offer RuPay credit cards to their customers for credit transactions over UPI, they are now ready to launch a "Credit Line on UPI" feature.

What are the plans?

People familiar with the matter told ET that Axis Bank and HDFC Bank are ready to launch this product in collaboration with fintech startups. They said startups like Navi, Super Money, and SalarySe will collaborate with these banks to offer this product. However, HDFC Bank, Axis Bank, and Kotak Mahindra Bank declined to comment.

The banks' rationale?

People familiar with the matter said that major banks were reluctant to launch this product until they received clarity on interest rates, how they would be charged, and the interest-free period customers would enjoy. A private sector banker said that recovering small loans on such a platform would be very difficult.

Benefits to Banks?

An official at a Delhi-based payment application said that many banks are looking at this as a way to attract new customers by offering small loans. He said this will help banks reach new customers and retain good customers who repay these loans on time.

What is a UPI Credit Line?

Sometimes you need to make an important payment, but you can't because you don't have enough money in your bank account. Under the UPI Credit Line facility, any UPI user can make necessary payments through UPI even if they don't have enough money in their bank account. This is a type of loan that you have to repay later, and it also attracts interest. NPCI launched this product in September 2023. Karnataka Bank and Suryoday Small Finance Bank, along with Navi and Paytm, became the first two lenders to offer credit lines on UPI.

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