Once again a big change is about to happen in India’s digital payment system. UPI, which made the country accustomed to cashless transactions, is now preparing to revolutionize the world of small loans. If the ongoing talks between National Payments Corporation of India (NPCI) and banks come to fruition, then in the coming days, loans taken through UPI will also come with interest-free period like credit cards. In such a situation, the tension of credit card companies is sure to increase.
Till now, the biggest problem of UPI credit line was that as soon as a person made a payment from it, interest started getting added from the same day. For example, if there is no money in your account and suddenly there is a need to spend Rs 2,000 to 5,000, then you could get the money through UPI credit line, but there was a fear of immediate interest being charged on it. For this reason, most people were hesitant in using this facility and it did not become very famous.
NPCI’s new plan
This problem is being solved under the new plan of NPCI. It is proposed that like credit card, a fixed grace period should be given in UPI credit line, in which the user will not have to pay any interest on payment till the fixed time. What this means is that spend today and pay before the bill due date, that too without any extra charges.
Relief for which people?
With this change, the acceptance of UPI credit line can increase rapidly. This will be a big relief especially for those who do not have credit cards or whose credit score is not considered sufficient for the card. Easy terms, digital access and small amount instant credit can make it a strong alternative to credit cards.
Banks’ initial initiatives
Some banks have already taken steps in this direction. Yes Bank has already introduced UPI credit line with an interest-free period of 45 days, while Suryoday Small Finance Bank is offering 30 days interest-free facility. It is clear from these experiments that the market is serious about this model.
Basic thinking of RBI
It is noteworthy that the concept of UPI credit line was first introduced by RBI Governor Shaktikanta Das in April 2023 and it was formally launched in September 2023. Its objective was to provide easy loans to those people and small businessmen who are left out of the traditional credit system.
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