- RBI plans to let Small Finance Banks offer pre-approved credit lines through UPI.
- This will help people with no credit history access small loans.
- Official guidelines will be released soon, and RBI will also use podcasts to spread information.
The Reserve Bank of India (RBI) has proposed that small finance banks (SFBs) should be allowed to offer pre-approved credit lines through UPI (Unified Payments Interface). UPI is a real-time payment system used for mobile transactions across India, created by the National Payments Corporation of India (NPCI).
In September 2023, UPI’s features were expanded, allowing commercial banks (excluding payments banks, SFBs, and regional rural banks) to link pre-approved credit lines. RBI Governor Shaktikanta Das believes this change will help provide affordable, short-term credit to people who have never used credit before, known as “new-to-credit” customers.
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Governor Das also emphasized that small finance banks, which use a technology-driven, low-cost model, are well-suited to offer these services to customers in rural and remote areas. This could expand the reach of credit to a larger segment of the population. The RBI plans to release the necessary guidelines soon to implement this proposal. The announcement was made as part of the RBI’s latest bi-monthly monetary policy update.
Read in detail: RBI Monetary Policy: A Guide to India’s Financial Backbone
In addition to this proposal, Governor Das highlighted that the RBI is working to improve its communication with the public. The central bank has been increasingly active on social media and is planning to launch podcasts to share important information with a broader audience, ensuring transparency and increasing awareness.
| Key Terms | Meaning |
|---|---|
| UPI | Unified Payments Interface – A fast, real-time payment system for mobile transactions in India. |
| Credit Line | A set amount of credit made available to a borrower, which can be used as needed. |
| New-to-Credit | Customers who have never used credit or loans before. |
| Small Finance Banks (SFBs) | Banks that provide basic banking services to underserved areas, using technology to keep costs low. |
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