In a move aimed at enhancing financial inclusion. RBI has announced a proposal to allow SFBs to offer pre-sanctioned credit lines through the Unified Payments Interface (UPI). UPI is a fast, and real-time payment platform. UPI is developed by the National Payments Corporation of India (NPCI) for mobile-based transactions. This decision will boost access to affordable credit for underserved sections. It is also useful for small businesses, micro-entrepreneurs, and individuals in rural and semi-urban areas as well. In September 2023, RBI had already broadened UPI’s scope by enabling pre-approved credit […]
RBI Proposes Allowing Small Finance Banks To Offer Credit Lines via UPI
In a move aimed at enhancing financial inclusion. RBI has announced a proposal to allow SFBs to offer pre-sanctioned credit lines through the Unified Payments Interface (UPI). UPI is a fast, and real-time payment platform. UPI is developed by the National Payments Corporation of India (NPCI) for mobile-based transactions. This decision will boost access to affordable credit for underserved sections. It is also useful for small businesses, micro-entrepreneurs, and individuals in rural and semi-urban areas as well.
In September 2023, RBI had already broadened UPI’s scope by enabling pre-approved credit lines to be linked to UPI, allowing them to be used as funding sources by all commercial banks. However, this did not apply to Payments Banks, SFBs, or Regional Rural Banks (RRBs).
Mohit Bedi, Co-founder & CBO, Kiwi, said, “This is great news for SFBs. Credit on UPI opens up a new business avenue for SFBs, which didn’t previously exist. Many SFBs, like AU Bank, have already found success entering the credit space through credit cards.”
According to RBI Governor Shaktikanta Das. Extending credit lines through UPI could help provide low-cost, short-term financial products to customers new to credit. SFBs, which operate on a high-tech, low-cost model, are well-positioned to reach underserved populations and extend credit access through UPI, he added. The Governor also said that the Reserve Bank has been deploying traditional. This also includes new-age communication techniques as a key part of its toolkit. All of this is done to ensure transparency and greater impact of its decisions, explain the rationale behind its decisions, and disseminate various awareness messages to a wider audience.
The RBI has been expanding the scope of its public awareness activities including through social media over the last few years. As part of the Reserve Bank’s latest bi-monthly monetary policy announcement, Das revealed that new guidelines will be issued soon to facilitate this development. The Governor also mentioned that the RBI uses traditional and modern communication methods. This is done for enhancing transparency and better communicate its decisions to the public.
In line with this, the RBI is expanding its outreach efforts. This includes launching podcasts to make critical information more accessible to the general public.
Small Finance Banks in India are a category of banks established to provide basic banking services. SFBS primarily works for underserved sections of the population such as small businesses, unorganized sectors, micro and small industries, and individuals in rural and semi-urban areas. These banks are licensed and regulated by the Reserve Bank of India (RBI) under the Banking Regulation Act, of 1949.
