The Reserve Bank of India issued a circular on June 23 directing that the prudential treatment of credit facilities offered through UPI shall be determined solely by the nature of the underlying credit product. The directive applies to all banks operating pre-sanctioned credit lines through UPI. The RBI first authorized this feature in September 2023.
Banks cannot create new lending categories by routing credit through UPI or other payment mechanisms under the updated framework. Only credit facilities already permitted under existing RBI regulations may be offered through these channels.
The clarification addresses inconsistencies in how banks have applied prudential standards to UPI-linked credit since the 2023 authorization. Multiple banks and fintech platforms have integrated credit line features into UPI apps over the past three years.