UPI To Introduce Zero-Balance Payments: A New Feature Set To Launch Soon

Imagine making payments via UPI even when your bank account is low on funds—soon, this could be a reality. The National Payments Corporation of India ( NPCI ) is set to introduce a UPI credit line facility, first announced nine months ago, offering a convenient financial cushion for transactions.

What is the UPI Credit Line Facility?
Similar to a pre-approved loan, the UPI credit line links users' UPI accounts to their bank accounts. Eligibility is based on the customer's CIBIL score , initially catering to traders. This innovative feature allows transactions to proceed even when account balances are insufficient.

Interest Implications for Traders:
Traders utilizing the UPI credit line will incur interest charges. Discussions are underway with both government and private banks, including Indian Bank, ICICI Bank, Axis Bank, and PNB, who have already pledged support.

Benefits Over Traditional Methods:
Unlike credit card payments, which levy a fee of approximately two per cent on transactions exceeding Rs 2000, the UPI credit line offers a fee-free alternative. It functions akin to an overdraft facility, enhancing cash flow management for businesses.

Transaction Interchange Details:
Merchants currently pay interchange fees to credit issuers, often around 90 per cent of the merchant discount rate. While specifics for UPI credit line interchange fees remain pending, an expected rate of 1.2 per cent is anticipated, pending official circular issuance.

Expansion of UPI Services:
In a strategic move, NPCI has partnered with Qatar National Bank (QNB) to extend UPI services to Qatar. This collaboration aims to introduce seamless payment solutions through QNB, marking an international milestone for UPI.