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A Game-Changer for Indian Digital Payments: UPI's Integration with Pre-Approved Credit Lines

By - King Stubb & Kasiva on September 15, 2023

In a bold move that is set to reshape India's digital payments landscape, the Reserve Bank of India (RBI) has unveiled a revolutionary plan to expand the scope of the Unified Payments Interface (UPI) System. This groundbreaking decision allows the seamless integration of pre-approved credit lines offered by banks into the UPI framework, fundamentally altering the way financial transactions are conducted across the nation.


The RBI laid the foundation for this groundbreaking transformation back in April 2023 when it proposed an innovative idea aimed at enhancing the capabilities of the Unified Payments Interface (UPI). The proposal sought to facilitate seamless transfers to and from pre-sanctioned credit lines issued by banks, marking a novel concept in the domain of digital payments. Fast forward to September 4, 2023, and the RBI has officially announced the implementation of this monumental change.[1]

Prior to this transformative step, the UPI System was primarily designed for transactions solely based on the deposited amount in a user's linked bank account or wallet. However, with the integration of pre-approved credit lines, the UPI System now mirrors the functionality of a Buy Now, Pay Later (BNPL) service, allowing customers to make payments even when their associated accounts or wallets lack sufficient funds.

Expanding the UPI Ecosystem

The RBI's circular titled 'Operation of Pre-Sanctioned Credit Lines at Banks through UPI' has unveiled a visionary outlook for the future of digital payments in India. Under this initiative, payments can now be seamlessly processed through pre-approved credit lines issued by Scheduled Commercial Banks, subject to the prior consent of individual customers.

This transformative development signifies a monumental shift in the intersection of banking and digital payments in India. It empowers individuals by granting them greater financial flexibility while also opening new horizons for banks to innovate and offer tailored products and services designed specifically for the Indian market.

Customizing Credit Line Terms

To ensure a seamless transition into this new era of digital payments, the RBI has empowered banks to stipulate terms and conditions governing the utilization of these pre-approved credit lines.[2] These terms encompass a wide array of aspects, including:

  • Credit Limit: Banks can specify the maximum credit amount that customers can access via UPI.
  • Credit Duration: The time frame during which the credit line remains available for use.
  • Interest Rates: The rates at which interest will be levied on the utilized credit.
  • Additional Conditions: Banks can introduce supplementary conditions in alignment with their board-approved policies.

This flexibility not only nurtures innovation but also ensures that customers can choose credit lines that align perfectly with their financial needs and preferences.

Cost Reduction and Market Expansion

The primary driving force behind this transformative step lies in its potential to reduce the costs associated with financial offerings. By seamlessly integrating credit lines into the UPI ecosystem, banks can streamline their operations, reduce expenses, and subsequently pass on these cost savings to customers. This, in turn, paves the way for financial products that are not only more accessible but also more affordable for a wider segment of the population.

Moreover, the introduction of pre-approved credit lines through UPI is expected to stimulate the development of unique, location-specific financial products. Banks can leverage this opportunity to create offerings that cater precisely to the diverse needs of the Indian market, thereby fostering greater financial inclusion and economic growth.

The Power of UPI

The Unified Payments Interface (UPI) has emerged as a robust and versatile payment platform in India. Presently, it handles a staggering 75% of the country's retail digital payment volume. The UPI's adaptability and scalability have enabled the creation of numerous innovative products and features that align seamlessly with India's digital payment objectives.[3]

Recent milestones, such as permitting RuPay credit cards to be linked to UPI, highlight the platform's commitment to innovation and inclusivity. UPI transactions primarily involve deposit accounts at banks and occasionally incorporate intermediaries like prepaid instruments and wallets.

A Pioneering Achievement

In August, the UPI crossed a remarkable milestone by processing over 10 billion transactions.[4] This accomplishment underscores the growing adoption of digital payments in India. In July, the number of UPI transactions stood at 9.96 billion, and in June, it was 9.33 billion, as reported by the National Payments Corporation of India (NPCI).[5] The integration of pre-approved credit lines through UPI holds the potential to further accelerate this growth by reducing transaction costs and providing greater financial accessibility to all.


The Reserve Bank of India's decision to incorporate pre-approved credit lines into the UPI System marks a watershed moment in the evolution of digital payments in India. This visionary move not only enhances financial flexibility for individuals but also paves the way for innovative banking solutions that are tailor-made for the Indian market.

As India continues to embrace digital payments and strive for greater financial inclusion, the UPI System stands as a shining example of how technology and innovation can transform the financial landscape. With the potential to lower costs, encourage innovation, and fuel financial growth, the integration of pre-approved credit lines into UPI underscores India's unwavering commitment to a digitally driven financial future.


What is the Unified Payments Interface (UPI) System?

The Unified Payments Interface (UPI) System is a real-time payment platform developed by the National Payments Corporation of India (NPCI). It allows individuals to make digital transactions seamlessly using their mobile devices. UPI enables users to send and receive money, pay bills, shop online, and perform various financial transactions directly from their bank accounts.

How does the integration of pre-approved credit lines in UPI benefit consumers?

The integration of pre-approved credit lines into UPI offers consumers greater financial flexibility. It allows users to make payments even when their linked bank accounts or wallets have insufficient funds, functioning like a Buy Now, Pay Later (BNPL) service. This ensures that individuals can meet their financial needs promptly, enhancing their overall financial convenience and reducing the need for emergency loans or credit card debt.

Are there any restrictions on the terms and conditions of pre-approved credit lines in UPI?

While pre-approved credit lines can be integrated into the UPI System, banks have the authority to set terms and conditions for their use, including factors like credit limits, credit duration, and interest rates. These terms are in accordance with each bank's board-approved policies, providing consumers with a variety of credit line options to choose from, each tailored to their specific financial requirements and preferences.

[1] RBI/2023-24/58 CO. DPSS.POLC.No. S-567/02-23-001/2023-2024, Operation of Pre-Sanctioned Credit Lines at Banks through Unified Payments Interface (UPI) (

[2] 3, Operation of Pre-Sanctioned Credit Lines at Banks through Unified Payments Interface (UPI) (

[3] Payment and Settlement Systems, Statement on Developmental and Regulatory Policies, Press Release: 2023-2024/23 (

[4] UPI Monthly metrics, (

[5]  UPI Ecosystem Statistics, (

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