NEW DELHI — The
Unified Payments Interface (UPI) has achieved 15,547 crore transactions worth
INR 223 lakh crore from January to November this year, ‘showcasing its
transformative impact on financial transactions’ in India, the Finance Ministry
said on Saturday.
The Finance Ministry also said that UPI is now accepted in
seven countries including France, UAE, Singapore, Sri Lanka, Mauritius, Bhutan
and Nepal. The UPI system provides a cheaper and quicker alternative to the
available channels of cross-border remittances.
UPI has succeeded in increasing financial inclusion and
promoting equitable economic growth by enabling underserved groups, including
subprime and new-to-credit borrowers to access formal credit for the first
time, according to a new study by IIM and ISB professors.
The authors said the success of UPI can be replicated in
other countries as well and India can play a leading role in helping them adopt
the fintech system.
"Within a short span, UPI led to exponential
penetration of digital payments across India and is used at all levels from
street vendors to large shopping malls
Since its launch in 2016, the Unified Payments Interface
(UPI) has transformed financial access in India, enabling 300 million
individuals and 50 million merchants to perform seamless digital transactions,
according to a study by IIM and ISB professors.
By October 2023, 75 per cent of all retail digital payments
in India were through UPI. The rapid adoption of UPI was possible due to
affordable internet across the country. A 10 per cent increase in UPI
transactions led to a 7 per cent rise in credit availability, reflecting how
digital financial histories enabled lenders to assess borrowers better., the
study states.
The authors said fintech lenders scaled rapidly, increasing
their loan volumes 77 times, far outpacing traditional banks in catering to smaller,
underserved borrowers.
The study also highlights that despite the credit surge,
default rates did not rise, showing that UPI-enabled digital transaction data
helped lenders expand responsibly.
In order to ensure greater financial inclusion, the RBI last
week decided to permit small financial banks (SFBs) to also extend
pre-sanctioned credit lines through the UPI.
In September 2023, the scope of Unified Payments Interface
(UPI) was expanded by enabling pre-sanctioned credit lines to be linked through
UPI and used as a funding account by Scheduled Commercial Banks but Payments
Banks, Small Finance Banks (SFBs) and Regional Rural Banks were excluded from
this ambit.
“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,” the RBI said.
“It is, therefore, proposed to permit SFBs to extend
pre-sanctioned credit lines through the UPI. Necessary guidelines will be
issued shortly,” the RBI statement added.
