Credit on UPI: How to Apply for UPI Credit?

Imagine needing to make an urgent payment through your UPI account, only to find out your balance is too low. To solve this, the Reserve Bank of India introduced a UPI credit in 2023. This feature lets you borrow up to a certain limit directly from your account to complete transactions without delay.

Banks charge a one-time processing fee to activate this service, and the interest depends on how quickly you repay. Since it’s a type of overdraft, the interest rate is generally higher than what you’d get with a personal loan.

If you're wondering how to apply for the UPI credit, this blog will guide you through the process and explain everything in more detail.

What is Credit on UPI?

The Credit on UPI is a new feature that allows individuals and businesses to access pre-approved credit directly through their bank. This means you can borrow money from your bank without needing a separate credit card or going through a lengthy application process.

With this feature, your UPI account is connected to a credit instead of just your savings account. When you make payments, the amount is deducted from the loan account linked to your credit, not your regular account balance. This makes borrowing more straightforward and fully digital, removing the hassle of managing multiple credit cards or dealing with physical paperwork.

It's a convenient option for those looking for easy access to credit for personal or business needs, offering a modern, streamlined way to handle short-term borrowing.

Benefits of UPI Credit

The introduction of credit on UPI has expanded its use by allowing users to access credit directly through the platform. Here are some of the benefits of this feature:

1. Simple Linking: You can link your credit to your UPI account using your registered mobile number. This helps you easily check and activate the borrowing limit offered by your bank.
2. Secure Transactions: All transactions made using a credit on UPI are protected by a UPI PIN, ensuring that only you can authorise payments and keeping your account secure from unauthorised access.
3. Detailed Information: The UPI app provides clear details about your credit, including how much of it you’ve used, the remaining balance, and any ongoing EMIs tied to the credit.
4. Issue Resolution: If you face any problems, such as disputes over transactions, the UPI app has a built-in help section (ODR) to address and resolve them, promoting transparency and ease of use.
5. Varied Payment Options: With a credit on UPI, you can make payments to merchant QR codes or complete purchases on e-commerce platforms without needing a physical card.
6. More Spending Power: This feature gives you access to additional funds, enabling you to handle larger expenses or make purchases without worrying about immediate cash availability.
7. Inclusive Access: Unlike traditional credit or debit cards, you don’t need a physical card to use this feature, making it accessible to a wider group of users.

How Banks Are Introducing Credit on UPI?

Several banks are now offering credit options via UPI, making it easier for users to access short-term credit directly through their UPI apps. For instance, ICICI Bank provides PayLater, an overdraft facility, while HDFC Bank offers UPI Now PayLater. Karnataka Bank has also rolled out a credit on UPI, partnering with Navi Technologies and supported by the National Payments Corporation of India (NPCI). Additionally, PayU has teamed up with NPCI to introduce a similar feature on its platform. These developments showcase how UPI is expanding to include more flexible payment solutions for consumers.

How to Apply for Credit on UPI?

To get a credit on your UPI app, you need to follow these steps:

• Step 1: You can apply for a credit by visiting your bank or doing it online. During the application, you'll need to submit documents like your income proof, address proof, and identity proof. To be eligible, you should be an Indian citizen, over 18 years old, and have a valid PAN and Aadhaar card with your mobile number linked to Aadhaar.
• Step 2: The bank will check your application and documents to evaluate your creditworthiness and decide on your borrowing limit. If you're approved, the bank will notify you.
• Step 3: Once your credit is approved, you’ll need to link it to your UPI account. This can be done easily by selecting the ‘Add Credit’ option in your UPI app and choosing your bank.
• Step 4: After linking, you can start using the credit. It works just like an overdraft, allowing you to make payments using your available borrowing limit. This means you can use it to pay for purchases, just like any other payment method through UPI.

Do's and Don'ts of UPI Credit

Do's:

• Set a Unique PIN: Create a separate UPI PIN specifically for your "Credit on UPI" transactions. This adds an extra layer of security to your payments.
• Use Trusted Payment Methods: When paying merchants, always use QR Codes or trusted e-commerce platforms. This ensures that you are using your Credit safely.
• Set Up Autopay: To make bill payments easier and timely, consider setting up UPI Autopay. This helps you avoid missing any payments on your Credit.
• Update Your Contact Info: Keep your phone number updated with your bank. This ensures smooth linking of your Credit to UPI and helps in receiving important alerts.
• Check Your Balance: Before making payments, take a moment to check your available balance and the outstanding amount on your UPI app. This helps you avoid spending more than you can afford.

Don'ts:

• Don't Share Your PIN: Keep your UPI PIN private. Sharing it with anyone puts your account at risk of unauthorised access.
• Avoid Using the Same PIN: Do not use the same PIN for both your "Credit on UPI" and your savings account. Using different PINs boosts your security.
• Never Share Your OTP: Don’t share the OTP you receive during registration. This is an important part of keeping your account secure.
• Don't Skip Guidelines: Follow the Credit usage guidelines provided by your bank. Ignoring these rules could lead to complications with your account.
• Stay Within Your borrowing Limit: Be mindful of the borrowing limit set by your bank. Going over the limit can cause issues with your Credit and may affect your credit score.
• Avoid Restricted Payments: Don't use your Credit to pay for items or services that are restricted by your bank or the RBI. Stick to authorised transactions.
• Don’t Miss Repayments: Follow the repayment schedule for your Credit. Missing payments can damage your credit score and make it harder to manage your finances.

Frequently Asked Questions (FAQs)

1. How does linking credit to UPI work?

   You can connect your credit card to your UPI account, which means you won’t have to carry around multiple cards. This link allows you to make payments through QR codes and shop on online platforms, making your transactions simpler. Having a credit linked to your UPI can also increase your buying power, as it gives you more flexibility to pay.

2. Can I link more than one credit to my UPI account?

   Yes, you can link more than one credit card to your UPI account. This is useful if you have multiple credit, as it makes your payments more accessible and gives you the option to choose the card you want to use for each transaction.

3. Are there any fees for linking my credit card to UPI?

   Yes, banks usually charge a one-time processing fee when you link your credit card to your UPI account. The amount of this fee can vary depending on the bank or financial institution you're working with.

4. How long does it take to process a credit link on UPI?

   The process typically takes around 2 to 4 weeks. Once you submit your application and the necessary documents, the bank will review them and inform you if your request is approved. It may take some time for the bank to verify everything before the link is set up.