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SFBs Recently Received RBI Approval to Offer Credit Lines via UPI.

Banking & Finance | Dated: 14 Feb 2025

In February 2025, Small Finance Banks (SFBs) recently received the Reserve Bank of India (RBI) approval to provide pre-sanctioned credit lines through the Unified Payments Interface (UPI). This move, effective from February 12, 2025, aligns with the RBI's December 2024 announcement during the Monetary Policy Committee (MPC) meeting.

🎯 Key Highlights:

  • - UPI, India's real-time payment system developed by the National Payments Corporation of India (NPCI), previously allowed transactions via savings accounts, overdrafts, prepaid wallets, and credit cards.
  • - The RBI has now expanded this to include pre-sanctioned credit lines issued by SFBs, enabling instant access to credit for individuals and small businesses.
  • - The Unified Payments Interface (UPI) is a digital payment tool that can help achieve the goals of the Pradhan Mantri Jan Dhan Yojana (PMJDY) and promote equitable economic growth.

💡 Other Important Facts:

  • (i) In September 2023, the RBI expanded the scope of UPI by allowing pre-sanctioned credit lines to be linked through the platform. However, this feature was initially limited to commercial banks, excluding Payments Banks, Small Finance Banks (SFBs), and Regional Rural Banks (RRBs).
  • (ii) Customers must provide explicit consent before availing credit lines, ensuring transparency. SFBs determine credit limits, interest rates, and repayment tenure under their board-approved policies. Customers are required to review the terms and conditions before opting in.
  • (iii) This facility aims to support 'new-to-credit' (NTC) customers, including farmers, small entrepreneurs, and rural businesses, helping reduce dependence on informal lenders charging high-interest rates.

📚 Test Your Knowledge:

Which financial institutions recently received RBI approval to offer pre-sanctioned credit lines through UPI?

Correct Answer: SFBs

🚀 Quick Recap:

About RBI

  • Governor : Sanjay Malhotra
  • Headquarter : Mumbai