Credit on UPI rails halts in its current avatar

Fintech startups have been asked to stop offering instant credit lines on UPI transactions and move to an overdraft model instead. These startups now have to rework arrangements with banks and their lending partners, which could bring in stricter verifications of borrowers

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By 

Pratik Bhakta

July 22, 2021

7 Min Read

Credit offered on the Unified Payments Interface—credit lines that can be used for UPI transactions—has attracted regulatory ire, according to multiple sources aware of the development. The National Payments Corporation of India, which manages UPI railroads, has asked fintech startups offering this facility to stop running these programs in their current avatar.

“These transactions were being marked as normal person-to-person or person-to-merchant transactions. From now on, these will have to originate as overdraft transactions,” said a banker. “The central bank, too, is unhappy with these current arrangements.”

An overdraft facility allows customers to withdraw or transact a certain amount above the balance kept in their savings accounts, somewhat like a credit line on a savings account. 

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