Understanding UPI Credit Line Fees: What You Pay & What You Don’t (Official Guide)

Source: NPCI

The financial landscape in India is constantly evolving, and the UPI Credit Line is the latest innovation set to transform how individuals and businesses access credit. Imagine getting instant access to pre-approved funds, not for sending to friends, but specifically for making payments to merchants, all through your familiar UPI app! It sounds incredibly convenient, but a vital question always arises: Are there any fees for using a UPI Credit Line?

Let’s dive deep into what the UPI Credit Line is, how it works, and precisely what costs you might encounter, drawing directly from the official NPCI product overview and FAQs, to give you the clearest and most accurate picture.

What is a UPI Credit Line? 

The “Pre-sanctioned Credit Line at Banks through UPI” is a financial offering designed to revolutionize the lending landscape, especially for low-ticket, high-volume retail loans. It empowers individuals and businesses to access pre-sanctioned credit lines directly from banks.

Think of it as a digital line of credit, approved by your bank, that’s linked specifically to your UPI ID. Instead of using your savings account, you can choose to pay merchants directly from this pre-approved credit facility when making UPI payments.

Are There Any Fees for Using a UPI Credit Line?

1. Transaction Fees for Linking & Payments

When it comes to the act of setting up and making payments, the UPI Credit Line is designed to be user-friendly:

• “Will I be charged for linking my Credit Line account on UPI?”
  • NPCI’s Answer: “Customers will not be charged for linking their account to Credit Line on UPI.”
  • Meaning: Setting up your credit line on your UPI app is FREE.

• “Is there any transaction charge for the customer to avail of credit from a Credit Line via UPI?”
  • NPCI’s Answer: “No, there will be no transaction charges for the customer to avail of credit from a Credit Line via UPI.”
  • Meaning: When you use your UPI Credit Line to pay a merchant, you will NOT be charged any specific transaction fee for that payment.

So, if you’re wondering how much does UPI Credit Line charge per transaction, for the actual payment to a merchant, the answer for the user is zero! There is no direct “interchange fee on UPI Credit Line” passed on to you for making a payment.

Summary of Transaction Costs: Linking your credit line and making merchant payments using it are both FREE for users.

2. Borrowing Costs: Where the Money Matters (and Varies by Bank)

While the transactions themselves are free for the user, remember that a UPI Credit Line is still a form of credit – you are borrowing money. Like any loan product, there are costs associated with the borrowing itself. These are the UPI Credit Line charges India that you need to be aware of:

• “Are there any fees associated with the Credit Line on UPI?”
  • NPCI’s Answer: “Fees may vary by bank, users should inquire about any applicable interest rates, processing fees, or other charges with the issuer bank before applying.”
  • Meaning: The primary costs are determined by your bank.

Here’s what those bank-specific costs typically include:

• Interest Rates: This is the main cost. When you draw funds from your credit line, that amount becomes a loan. You will be charged interest on the outstanding balance from the moment you use it until it’s fully repaid. Banks will set their own interest rates.
• Processing Fees: Some banks might charge a one-time processing fee when you activate the credit line.
• Annual/Maintenance Fees: Your bank might levy an annual or recurring fee for the credit line facility itself, separate from your usage.
• Late Payment Fees: If you fail to repay your borrowed amount (plus interest) by the due date, your bank will impose a late payment penalty.
• Other Charges: Depending on your bank’s specific policies, there could be other administrative charges, though the focus is on simplicity.

Summary of Borrowing Costs: The costs for a UPI Credit Line mainly stem from interest on the borrowed amount, and potentially processing fees, annual fees, or late payment fees set by your specific bank. Always check with your bank before opting in.

Crucial Usage Guidelines: Who Can You Pay? (NPCI’s Do’s & Don’ts)

This is a critical point clarified by the NPCI FAQs:

• “Can I make payment to any person or other Credit Line using the linked Credit Line on UPI?”
  • NPCI’s Answer: “No, only payment to merchant (P2M) transactions are allowed for CL on UPI.”
  • “Restricted Payments:” NPCI explicitly lists categories like P2P (Person-to-Person), P2PM, cash withdrawals, digital account opening, lending platforms, IPOs, Mutual Funds, and Foreign Inward Remittances as restricted.

What this means for you: The UPI Credit Line is designed for payments to businesses and service providers only. You cannot use it to send money to friends, family, or withdraw cash.

How to Use Your UPI Credit Line for Merchants?

Offline Merchants (QR Code):

• Open your UPI app.
• Click ‘Scan’ and scan the merchant’s QR code.
• Enter the amount.
• Crucially, select your “Credit Line account” from the drop-down menu.
• Confirm payment by entering your dedicated UPI PIN for the Credit Line.
• You’ll see a payment confirmation.

E-commerce Merchants (Online):

• At the merchant’s website/app, select ‘UPI app’ as your payment mode.

• Log in to your UPI app.
• Select the “Credit Line account” from the drop-down menu.
• Confirm payment using your dedicated UPI PIN for the Credit Line.
• You’ll be routed back to the merchant page upon confirmation.