Aimed at enabling faster credit access and opening up new avenues of growth for banks, RBI plans to fast-track credit access through UPI’s pre-sanctioned credit lines. It is set to revolutionize the way credit is accessed and distributed, paving the way for greater financial inclusion at the grassroots level.
Pre-sanctioned credit lines are a financial facility that offers a convenient borrowing option to customers.
This facility allows individuals to borrow a predetermined amount of money without having to apply for a loan. In essence, it works like a credit card, but with more flexibility and revolving nature.
The bank offers pre-sanctioned credit lines and verifies personal accounts to determine the pre-sanctioned credit limit that can be availed by the borrower.
One of the significant advantages of this facility is that it allows for faster processing of the application compared to traditional loans. However, the interest rates on the credit line may be relatively higher.
How Will it Work?
To access pre-sanctioned credit lines through UPI, users must go through a formal application process with their lender or bank, similar to applying for a traditional loan.
During the application process, the lender will conduct a comprehensive review of the applicant’s financial records, including credit score, income history, borrowing history, repayment history, and other relevant factors to determine the appropriate amount of credit line that can be granted.
Once the application is approved, the user will be granted the pre-sanctioned credit line based on their financial details, which can be used for their UPI financial transactions.
By introducing pre-sanctioned credit lines on UPI, the Reserve Bank of India (RBI) is taking a huge step toward unlocking financial inclusion in India.
With this move, customers will be able to make payments without the hassle of carrying multiple credit cards. This will breathe new life into the digital lending space and the Buy-Now-Pay-Later (BNPL) format, which still has a long way to go in Indian markets.
RBI plans to fast-track credit access through UPI’s pre-sanctioned credit lines, thus bringing a big change that will be creating new opportunities for growth and expan the reach of financial institutions.
Most importantly, it will make it easier for the unbanked population to access credit, increasing their financial literacy and promoting financial inclusion at the grassroots level.