New Delhi: The Unified Payments Interface (UPI) has achieved 15,547 crore transactions worth Rs 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.
