Soon, you can withdraw approved loan funds via UPI apps
What's the story
The National Payments Corporation of India (NPCI) has announced new rules for utilizing pre-sanctioned credit lines on Unified Payments Interface (UPI). Starting August 31, users will be able to link credit lines backed by fixed deposits (FDs), shares, bonds, or overdraft loans to their UPI apps. This means customers can access funds from pre-approved credit lines for transactions on platforms like Google Pay, PhonePe, and Paytm.
Enhanced functionality
Cash withdrawals, person-to-person payments allowed under new guidelines
The new NPCI guidelines also expand the scope of UPI payments. Previously, only person-to-merchant payments were allowed with these credit lines. However, under the updated rules, users will also be able to withdraw cash, transfer money to other individuals, and make direct payments to small merchants through UPI. This is a major improvement over the current system which only allows merchant payments.
Implementation details
Implementation of these new rules will be managed by banks
The implementation of these new rules will be managed by banks, payment service providers, credit line issuers, and third-party app providers. They will define how these credit lines can be used. The final approval for any payment will rest with the issuing bank or financial institution. However, rules may differ between lenders, which could complicate things for borrowers with loan accounts at multiple banks.
Policy shift
Policy allows cash withdrawals through credit lines
The new policy also permits cash withdrawals through these credit lines, a departure from the current restriction to only merchant payments. UPI apps will have to enable these features for all types of transactions including scan-and-pay, contact-based payments, self-transfers, and account transfers. The updated facility will make it easier for individuals and businesses to access credit for daily expenses directly through UPI.