RBI Allows Small Finance Banks to Give Credit on UPI

 Mumbai: The Reserve Bank of India (RBI) on Friday allowed small finance banks (SFBs) to offer pre-sanctioned credit lines through Unified Payments Interface (UPI). Till now, only scheduled commercial banks were allowed to offer pre-sanctioned credit lines on the flagship payments platform. The central bank in its monetary policy also made several positive announcements for banks such as raising the FCNR (B) deposit rates, development of the Secured Overnight Rupee Rate (SORR) benchmark and revision in limit of collateralised agriculture loans.

“Credit line on UPI has the potential to make available low-ticket, low-tenor products to ‘new-to-credit’ customers. SFBs leverage a high-tech, low-cost model to reach the last mile customer and can play an enabling role in expanding the reach of credit on UPI. It is, therefore, proposed to permit SFBs to extend pre-sanctioned credit lines through the UPI. Necessary guidelines will be issued shortly,” said the RBI in its monetary policy.

The central bank also enhanced the limit for collateral-free agriculture loan Rs 1.6 lakh to Rs 2 lakh. This will enhance coverage of small and marginal farmers in the formal credit system. The circular to this effect will be issued shortly said the RBI.