UPI credit line explained: Benefits, eligibility, and how to apply

The UPI, an important part of India’s paperless economy, has appeared in an ever-changing digital banking environment. Building on this model, the UPI credit line rollout allows for a seamless transition to include credit facilities into everyday transactions.

What is the UPI credit line?

The UPI credit line is a pre-approved credit facility that connects to a user's UPI account. It allows an individual to access borrowed funds for a payment or purchase that is then repaid later. This system eliminates the need for a readily accessible traditional credit card; it offers an easier-to-use and more accessible form of credit.

Key features of UPI credit line

1. Easy integration: Borrowers will have easy access to their funds by simply linking their credit line to any app using UPI.
2. Flexible repayment: Borrowers will have the option to pay back the entire amount of credit used or pay parts of it off using the flexibility they have with their own finances.
3. Safe money movement: Adding another layer of protection, each transaction will be verified with a unique UPI PIN.
4. Widespread use: You can use the credit line to pay for business through use of e-commerce platforms or by scanning QR codes.

Eligibility criteria

Potential applicants for the UPI credit line would be expected to meet the following definitive qualifications:

• Age: The applicant must be eighteen years of age at the time they apply for the credit line.
• Bank account: The applicant must have a checking or savings account at a bank that holds a UPI credit line account.
• Credit score: The assessment on whether a person has good credit history by the bank is a reasonable indicator of creditworthiness.
• KYC: The applicant must complete the KYC process, which means they are to provide proof of address information and identifying documentation.

How to set up the UPI credit line?

1. Open UPI app: Open your chosen UPI-enabled app, e.g. Google Pay, PhonePe or Paytm.
2. Find the credit services section: Go to the area in the app named 'loan' or 'credit'.
3. Apply for a credit line: After selecting to apply for a credit line, input the appropriate financial and personal information.
4. Complete KYC: Undertake the KYC process which could include documenting identity and the verification process.
5. Link and use: Once approved, the credit line is linked to your UPI account and available for use in the transactions.

Benefits of the UPI credit line

• Accessible: Offers an alternative to regular credit cards and can be an advantage for those who struggle to access traditional credit.
• Convenient: Allows people to access credit quickly and easily and does not require paper receipts or physical cards.
• Financial inclusion: The goal is to increase the number of people that can access formal credit in a way to enable greater participation in the economy.
• Cheap: Could be less than standard credit products because of the interest rate and fees.

Considerations & limitations

• Guidelines for usage: Credit lines may not support peer-to-peer transfers since credit lines are generally for merchant transactions.
• Impact to credit: There is a risk to your credit score if you don't repay your utilised credit on time.
• Availability: The UPI credit line feature is not supported by all banks, or all UPI applications.

In conclusion, the UPI credit line is an exciting development in the digital finance space in India. It is a convenient and flexible credit solution that can be integrated into day to day transactions easily. This feature could potentially increase financial inclusion, and allow customers to better manage their financial obligations, leveraging UPI"s wide acceptance.

Disclaimer: Mint has a tie-up with fin-techs for providing credit, you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit score. Mint does not promote or encourage taking credit as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.