5th August 2024 (9 Topics)
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Banks may offer small loans on UPI against FDs
Context
Private banks are likely to target new-to-bank customers for credit on UPI against fixed deposits as collateral. Although the National Payments Corporation of India (NPCI) is yet to launch a credit-line-on-UPI service, banks have begun working on their structures.
About the update:
- “Pre-sanctioned Credit Line at Banks through UPI” is an innovative financial offering designed to revolutionize the lending landscape. This product empowers individuals and businesses to access pre-sanctioned credit lines from banks.
- It facilitates the availability of low-ticket, high-volume retail loans, fostering economic growth and enhancing financial inclusion.
- Leveraging advanced technologies such as data analytics and artificial intelligence, banks can identify credit line opportunities for customers and merchants engaged in significant UPI-based digital payments.
- Since the customer is going to use UPI in which the customer is always connected, and available real-time the banks can start from the low-ticket credit lines and go higher up based on consumer behavior and repayment patterns.
National Payments Corporation of India (NPCI):
- The National Payments Corporation of India (NPCI) is an umbrella organization for operating retail payments and settlement systems in India.
- It is an initiative of the Reserve Bank of India (RBI) and the Indian Banks’ Association (IBA) to promote cashless transactions in the country.
- NPCI provides various retail payment and settlement systems such as Unified Payments Interface (UPI), Immediate Payment Service (IMPS), National Electronic Funds Transfer (NEFT), Real-Time Gross Settlement (RTGS), Bharat Bill Payment System (BBPS), and National Automated Clearing House (NACH).
- These services facilitate seamless and efficient fund transfers across different banks and payment platforms.
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