Credit Line on UPI - How It Works & Benefits

Credit Line on UPI - How It Works & Benefits

06 June 2024 | By INDIE

The sphere of payment methods available to the common man has evolved considerably over the last decade - from cash to cards and then UPI. As technology advances further, so does our ability to manage finances and conduct transactions seamlessly.  Traditionally, obtaining short-term credit has been limited to those with credit cards, involving numerous checks and processes. Then, credit became more accessible to a wider audience with the advent of Buy Now Pay Later (BNPL) schemes. Now, this accessibility is set to reach new heights with a credit line on UPI, reshaping the credit landscape on a massive scale.

In this blog post, we will cover the workings of the UPI credit line, exploring how this feature functions and the myriad benefits it offers to consumers.


How Does UPI Credit Line Work?

UPI has already revolutionized digital payments in India, offering a seamless and interoperable platform for financial transactions. Introducing a credit line on UPI adds another convenience layer, allowing users to access short-term credit directly through their UPI accounts. Here's how it works:

 1. Application Process

To access the credit line on UPI, users need to submit a formal application to their bank, linked to their UPI account. This application typically provides financial information such as income, credit score, and repayment history. Users may also need to submit supporting documents like income statements, identity proof, and address proof.    

2. Assessment and Approval

Banks assess the application and documents to determine eligibility and creditworthiness. If the application meets the bank's criteria, the borrower is notified of the approved credit limit and terms.

3. Credit Line Utilization

Once approved, users can utilize the approved credit limit as they wish. This flexibility allows for convenient borrowing for various expenses, similar to a credit card.

4.  Interoperability

One of the key advantages of UPI credit lines is their interoperability. Users can access and use the credit available on UPI across multiple payment apps. This means that regardless of the UPI app used, the credit facility remains accessible and can be utilized seamlessly.

5.  Integration with UPI Apps

When utilizing the credit facility, UPI apps are linked to the user's credit line. Transactions made using the credit appear as debits in the loan account associated with the UPI credit line rather than directly debiting the user's savings bank account.

Recommended Read: Is a Line of Credit Worth It?


Tenure and Interest Rates Related to a Credit Line on UPI

The tenure and interest rates associated with UPI credit lines play a crucial role in determining the affordability and accessibility of this financial service. Here's what you need to know:

● The tenure of this credit line can vary significantly, offering flexibility to borrowers. Banks may provide options for both short-term and long-term credit lines, allowing you to select a repayment period that aligns with your financial requirements.

● Interest rates for UPI credit lines are determined by various factors, including the bank's policies, the borrower's creditworthiness, and prevailing market conditions. However, these interest rates are typically lower compared to credit card interest rates.

● The relatively lower interest rates associated with UPI credit lines make them an attractive option for individuals seeking cost-effective financing solutions.


Benefits of Using a Credit Line on UPI

1. Increased Purchasing Power

Credit lines on UPI can empower you by extending your purchasing capacity. You can make transactions that surpass your immediate financial resources and make high-value purchases to seize opportunities without delay.

2. Inclusivity for Non-Credit Card Holders

A notable advantage of credit lines on UPI is their inclusivity. Unlike traditional credit facilities, which rely on credit or debit cards, these credit lines ensure a wider demographic can access credit without needing physical cards.

3. Emergency Support

These line of credit services can serve as a vital financial safety net during unforeseen expenses or emergencies. You can access credit when faced with unexpected financial challenges. This immediate access to funds offers reassurance and stability during times of need, alleviating financial stress.



The information provided in this article is generic and for informational purposes only. It is not a substitute for specific advice in your circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any financial decisions based on the contents and information.