The Unified Payments Interface (UPI) may now be used by borrowers to get digital credit lines from banks, according to a proposal made by the Reserve Bank of India (RBI).

This week, RBI Governor Shaktikanta Das made this declaration while delivering the outcomes of the bimonthly monetary policy committee meeting.

If this takes effect, borrowers will have direct access through UPI to digital credit lines, which are primarily provided by buy now, pay later companies.

"Scope of UPI to be expanded, by permitting operation of pre-sanctioned credit lines at banks, through UPI. This will further encourage innovation," in the words of Das.

It should be noted that UPI, a well-known payment system, presently processes 75 percent of all digital retail purchases in India. In keeping with India's digitization objectives, it has already been used to create a number of goods and features, including the recent approval for RuPay credit cards to be linked to UPI.

Presently, UPI transactions can take place between bank deposit accounts and are occasionally mediated by prepaid devices like wallets.

This may lower the price of such items and aid in the creation of distinctive goods for Indian consumers. The regulator stated that more instructions in this regard will be released separately.

In accordance with the current idea, UPI will permit transfers to and from deposit accounts as well as pre-approved credit lines at banks.

This indicates that borrowers will be able to pay back loans from banks via UPI. The central bank's suggestion to integrate credit lines in UPI is a breakthrough that will benefit Indian borrowers.

This change is anticipated to lower the cost of such credit products and make it simpler for borrowers to obtain loans from banks. In due course, the RBI is anticipated to release comprehensive guidelines for the use of pre-authorized credit lines via UPI.

"The RBI's forward-thinking decision to allow pre-sanctioned credit lines at banks to be accessible through UPI will drive innovation and revolutionize the way customers access credit. We believe this is a significant step towards a more efficient and digital banking ecosystem and will undoubtedly provide a much-needed boost to the industry. The ability to access pre-sanctioned credit lines through UPI will prominently help in reduction of the time and effort required for customers to secure loans, ultimately driving economic growth and development," Rajsri Rengan, India Head of Development, Banking and Payments, at FIS.