The Unified Payments Interface (UPI) has seamlessly integrated into our everyday financial transactions, providing a swift and convenient means of making payments when coupled with our online banking.
RBI’s Expansion of UPI Payments and Credit Lines
Many individuals and businesses have embraced UPI payments due to their user-friendly and efficient nature. Until recently, UPI transactions required a sufficient balance in the linked bank account or UPI wallet. However, a recent development by the Reserve Bank of India (RBI) has expanded the horizons of UPI payments, allowing transactions to occur even when the account balance is insufficient.
On September 4th, the RBI issued a circular that broadened the scope of UPI payments, enabling transactions involving pre-approved credit lines at banks. According to the RBI’s announcement, “This facility allows payments through a pre-approved credit line issued by a Scheduled Commercial Bank to individuals, with the customer’s prior consent.”
Banks have the authority to set the terms and conditions governing the usage of these credit lines, encompassing elements like credit limits, credit durations, interest rates, and more.
UPI Pay Later Offers Credit Freedom with HDFC and ICICI Banks
The UPI Pay Later feature essentially empowers users to spend from pre-approved credit lines and subsequently settle their dues via UPI transactions at a later date. Presently, HDFC Bank and ICICI Bank have introduced this feature as HDFC UPI Now Pay Later and ICICI Pay Later, respectively. This functionality is compatible with popular applications like Google Pay, Paytm, and PhonePe.
Here’s a breakdown of how it operates: Upon obtaining the user’s consent, the bank establishes a credit line with a predefined credit ceiling. Users can then make use of this credit and are obligated to repay the borrowed amount within a specified timeframe.
HDFC Bank has launched its ‘UPI Now Pay Later’ initiative, exclusively accessible to HDFC Bank account holders and compatible with all UPI apps. Users can avail themselves of a credit limit of up to ₹50,000, with a maximum credit tenure of 6 months.
The ICICI Pay Later feature provides users with instant digital credit for up to 45 days, allowing them to cover expenses, shop online, and make payments to any merchant with a UPI ID. ICICI Bank charges a one-time activation fee of Rs. 500 plus GST for this service, along with a service fee of Rs. 75 plus applicable taxes for every Rs. 3,000 spent from the ICICI Bank PayLater account, as stipulated on the bank’s official website.
