On Thursday, the Reserve Bank of India (RBI) proposed expanding the scope of the Unified Payments Interface (UPI) digital payment system to allow transfers in/out of credit lines pre-approved by banks.

“This can reduce the cost of such products and help develop unique products for the Indian market,” the RBI said in its development and regulatory policy statement.

The central bank had earlier allowed RuPay credit cards to be linked with UPI, enabling payments by credit on India’s flagship digital payments platform primarily for ‘pay now’. Before card linking was allowed, UPI transactions were essentially funds transfers between the sender’s and recipient’s sending or saving accounts.

When linked to UPI, the approved limit of RuPay credit cards can be used to make payments to merchants who pay fees for accepting such payments. The facility expands the scope of credit-sourced payments, and the RBI’s latest announcement will strengthen the UPI network used to facilitate credit-financed payments.

“Recently, RuPay credit cards were allowed to be linked with UPI. This is in addition to UPI’s existing linking facility with deposit accounts. It is now proposed to expand the reach of UPI by allowing the operation of pre-approved lines of credit at banks through UPI. This move will further innovation encouraged,” RBI Governor Shaktikanta Das said.

“This is a pre-approved line of credit. It means the bank has approved the line of credit, and customers can now do it through UPI,” Das told a news conference after the monetary policy release.

“The guidelines are obvious. It should be an approved limit for accounts, after which transfers can be made. There is no connection with today’s BNPL model,” RBI Deputy Governor M Rajeshwar Rao told a news conference.

“UPI currently involves transactions between deposit accounts or wallets and will now be extended further to credit lines provided by banks. So, in a sense, people can actually reduce the number of cards they carry and do these transactions on the UPI track,” RBI Deputy Governor T Rabi Sankar said.