Outlook Money
The Reserve Bank of India (RBI) has modified its policy to extend the usage of the Unified Payments Interface (UPI) to include transactions involving banks' pre-approved credit lines. This will increase the availability of credit.
According to the new policy, users can now borrow short-term funds directly from their UPI-linked bank accounts without needing a credit card or applying for a direct loan.
This new policy will lead to an instant credit facility by making the transfer of money easy at times of need. Now, Indian customers are also not obliged to have a credit card to get a small loan.
It allows improved borrowing management and here consumers are able to use their credit line as a payment instrument while making payments via UPI, i.e., switching wallets and accounts.
This new policy has several risks which include overspending and Poverty defaults- Banks may extend lines of credit based on past transactions during a credit check for credit cards, which could lead to an increase in defaults.