Even after over two years after its launch, credit line on Unified Payments Interface (UPI) has not taken off due several teething problems such as underwriting problems and lack of awareness, said industry expects.
This comes at a time when UPI has been a resounding success. It crossed 21.6 billion transactions worth nearly Rs 28 lakh crore in December.
What did managing director and CEO of NPCI say?
Dilip Asbe, managing director and CEO of the National Payments Corporation of India (NPCI), said the share of credit line on UPI transactions remains negligible and that the product is still in a build-out phase. “The share of credit line on UPI, compared with total UPI volumes, is very, very small and has not even started. Many banks are yet to enable it fully, and it continues to be a work in progress,” he said.
The credit line on UPI framework allows lenders to offer small-value, high-frequency loans to consumers and merchants. One of the main reasons, bankers say, is the large number of options available to customers.
“Since customers already have alternatives such as credit cards and unsecured loans, they are not opting for a credit line on UPI yet. Once they realise it is a simpler option, adoption may pick up—but it will take time,” Rajneesh Karnatak, managing director and CEO of Bank of India, said.
Cost considerations are also shaping banks’ strategies. Lalitha Nataraj, managing director and CEO of NPCI BHIM Services, said banks’ current underwriting and collection costs make small credit lines unviable.
Leveraging AI and DPI for Future Scale
She added that the combination of consented Digital Payments Infrastructure (DPI) and artificial intelligence (AI) could change this, enabling continuous, data-driven assessment rather than a one-time check at the point of application. “Using DPI and AI, banks can assess customers continuously within consented boundaries, lowering the cost of underwriting and collections and making smaller credit lines feasible,” she said.
Currently, nine private sector banks and six public sector banks are offering credit lines on UPI, according to the NPCI website. In a bid to boost financial inclusion, the Reserve Bank of India in February allowed small finance banks to offer the product. Currently, Suryoday Small Finance Bank and Slice Small Finance Bank have rolled out the credit line on UPI.