How UPI Credit Line Works & Who Should Use It

you need to pay for groceries, a sudden bill, or an online order. But your savings account balance is a little low. A new fix may save the day: a credit line on UPI. Instead of rejecting the payment, the system allows you to use a pre-approved credit limit linked to your UPI ID and settle it later.

Sounds interesting? It is indeed! And we’re here to demystify it for you!

What is a Credit Line on UPI?

A UPI credit line is a pre-sanctioned credit facility issued by a bank or NBFC. It is linked directly to your UPI account instead of your savings account. When activated, you can draw from this credit line as needed for UPI payments. It’s pretty much like a credit card, but integrated into the UPI infrastructure.

Unlike a traditional loan, which gives you a lump sum, a UPI credit line offers a flexible, draw-as-needed limit. Unlike a physical credit card, there’s no plastic; the credit is integrated directly into your UPI interface. You repay as per the bank or app terms.

This facility formally came into effect on 4th September 2023. It is governed under regulatory guidelines issued by the Reserve Bank of India (RBI) via the National Payments Corporation of India (NPCI).

How Does a UPI Credit Line Work?

Here’s how the UPI credit line works -

1. Bank assesses your income, credit history, and KYC. 
2. Based on your profile, it sanctions a credit limit.
3. On approval, you link that credit line to your UPI ID through your UPI app (e.g. Google Pay, PhonePe, Paytm).
4. You make payments via UPI as usual via QR scan or VPA. While doing so, you draw from the credit line instead of your bank balance.
5. At the billing or due date, repay the amount used. Once paid, the full limit is restored.

Also Read - Line-based personal loans (revolving credit) explained

Who Is Eligible for a UPI Credit Line?

Here are the basic UPI credit line eligibility criteria -

• A savings or current bank account with a bank partnered for a UPI credit line
• Full KYC (PAN, Aadhaar, mobile number, address verification)
• Clean credit history or acceptable creditworthiness (banks assess repayment records)
• Registered UPI ID or VPA and UPI app support for credit-line linking

Do note that UPI credit line eligibility criteria may vary by bank/app. For instance, some may add income-proof or transaction history requirements.

How to Apply for a Credit Line on UPI: Step-by-Step Process

Here’s how to apply a credit line on UPI quickly -

1. Open your preferred UPI app (Google Pay, PhonePe, Paytm, etc.) and go to the “Credit Line” or “Loans / Credit” section.
2. Select your bank from the list of supported banks.
3. Complete KYC and submit required documents (PAN, Aadhaar, address, income proof where requested).
4. Wait for approval. During this period, banks assess creditworthiness and then sanction a pre-approved limit.
5. Once approved, link the credit line to your UPI ID in the app. Set up a dedicated UPI PIN for credit-line transactions (for security).
6. Start using the UPI credit line for merchant payments or online shopping. 
7. Repay as per the bank’s billing cycle.

Benefits of Using a Credit Line on UPI

Here are a few reasons for using a credit line on UPI -

• Instant access to credit without waiting for loan disbursal
• No paperwork or physical card required
• Acceptable across all UPI-enabled merchants and QR-code payments
• Useful for sudden, short-term expenses or emergencies
• Gives flexibility and increases purchasing power without draining savings
• Ideal for users without a credit card who need credit on the go
• Helps smooth cash flow, since you repay only what you use

Should You Use a UPI Credit Line?

UPI credit line combines the ease of UPI with the flexibility of credit. It fits well when you need quick funds without disrupting your bank balance. But like all credit, it works best when handled responsibly.

If you need large amounts, long-term repayment, or want better credit-building, then a traditional loan may still be a more suitable option. NBFCs like Hero FinCorp offer a fully digital loan process with instant disbursal. Apply now and experience the difference.

Frequently Asked Questions

Can I get multiple UPI credit lines from different banks?

Yes. You can get multiple UPI credit lines from different banks if you have active accounts with multiple banks that offer the facility and you meet their eligibility criteria.

Is the UPI credit line interest-free?

No. Interest applies similarly to a credit facility. If you repay within the due date, it may act like short-term credit, but interest or charges will apply as per the bank’s terms.

What is the typical credit limit under the UPI credit line?

It depends on the bank’s assessment of your creditworthiness, income, and history. Limits range from ₹1,000 to ₹2 Lakhs, and sometimes even ₹5 Lakhs!

Does using a UPI credit line affect my credit score?

Yes. Just like any credit facility. Timely repayments could build positive credit behaviour; defaults or delays will harm your score.

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