 "UPI")
You can make payments through your UPI even if your bank account lacks sufficient funds as the Reserve Bank of India has paved the way for transfers from pre-sanctioned credit lines at banks via the UPI network.
Until now, UPI users could only link their savings accounts, overdraft accounts, prepaid wallets, and credit cards to the UPI system. However, the RBI has now allowed you to harness your pre-approved credit line to conduct UPI transactions.
According to a notification from the RBI on September 4, 2023, banks can offer a credit line facility to UPI users, allowing users to spend from a pre-sanctioned credit line and settle the dues later.
“Under this facility, payments through a pre-sanctioned credit line issued by a scheduled commercial bank to individuals, with the prior consent of the individual customer, are enabled for transactions using the UPI system.” This development empowers you to link these credit lines issued by banks to your UPI account, facilitating seamless payment.
Pre-sanctioned credit lines essentially involve pre-approved credit, which banks grant to customers based on data analytics conducted on both internal deposit customers and potentially non-customers whose creditworthiness has been assessed by the bank.
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Known as UPI Now, Pay Later by some banks, this feature allows individuals to spend from this pre-sanctioned credit line and settle their dues later. HDFC Bank and ICICI Bank have already launched credit lines — HDFC UPI Now Pay Later and ICICI PayLater, respectively.
These are overdraft facilities provided by a bank to an account holder, which can be utilised through all UPI-based apps including Google Pay and MobiKwik.
Both banks have kept a maximum credit line of Rs 50,000 based on the account holders’ eligibility.
How does HDFC Bank's pay later work?
When you activate PayLater on your UPI app, a new account gets created where a certain credit line will be assigned to you which can be used to make transactions via UPI. But you can only make payments to merchants through this overdraft account opened under PayLater on UPI. Fund transfer to individuals is restricted.
In the case of PayLater, you will pay interest only for the credit limit you utilise and for the number of days you use it and not for the entire amount.
You can make payments from through your UPI even if your bank account lacks sufficient funds as the Reserve Bank of India has paved the way for transfers from pre-sanctioned credit lines at banks via the UPI network.
Until now, UPI users could only link their savings accounts, overdraft accounts, prepaid wallets, and credit cards to the UPI system. However, the RBI has anow allowed you to harness your pre-approved credit line to conduct UPI transactions.
According to a notification from the RBI on September 4, 2023, banks can offer a credit line facility to UPI users, allowing users to spend from a pre-sanctioned credit line and settle the dues later.
“Under this facility, payments through a pre-sanctioned credit line issued by a scheduled commercial bank to individuals, with the prior consent of the individual customer, are enabled for transactions using the UPI system.” This development empowers you to link these credit lines issued by banks to your UPI account, facilitating seamless payment.
Pre-sanctioned credit lines essentially involve pre-approved credit, which banks grant to customers based on data analytics conducted on both internal deposit customers and potentially non-customers whose creditworthiness has been assessed by the bank.
Known as UPI Now, Pay Later by some banks, this feature allows individuals to spend from this pre-sanctioned credit line and settle their dues later. HDFC Bank and ICICI Bank have already launched credit lines — HDFC UPI Now Pay Later and ICICI PayLater, respectively.
These are overdraft facilities provided by a bank to an account holder, which can be utilised through all UPI-based apps including Google Pay and MobiKwik.
Both banks have kept a maximum credit line of Rs 50,000 based on the account holders’ eligibility.
How does HDFC Bank's pay later work?
When you activate PayLater on your UPI app, a new account gets created where a certain credit line will be assigned to you which can be used to make transactions via UPI. But you can only make payments to merchants through this overdraft account opened under PayLater on UPI. Fund transfer to individuals is restricted.
In the case of PayLater, you will pay interest only for the credit limit you utilise and for the number of days you use it and not for the entire amount.
How is the interest rate calculated?
You will be charged simple interest basis of the amount borrowed and for the number of days you use it.
Example - In case you use your PayLater account balance of Rs 5,000 for 10 days, then interest will be charged on Rs 5,000 for 10 days only. This interest will be debited from the PayLater account at the end of the month.
Interest will be debited to your PayLater account on the last day of every month. You need to deposit the interest amount in your PayLater account via online transfer. In case, you have not paid the interest within three days (grace period), the Bank will recover the same by deducting it from your primary account (Savings/ Current).
A fee of Rs 199+GST will be charged on the new application.
How ICICI's PayLater facility works
In the case of ICICI Bank’s PayLater product, the account holder will get up to 45 days of zero-interest digital credit. The amount could be used towards paying bills, online shopping and paying to any merchant UPI ID instantly.
The PayLater dues will be debited automatically from your ICICI Bank Savings Account. Customers will be charged one-time activation fees of Rs 500 plus GST . A service charge of Rs.75 + applicable taxes is levied on every Rs. 3000 of monthly spent from your ICICI Bank PayLater account; applicable on monthly spend of Rs.3000 & above. Customers will be charged penal interest based on the daily total outstanding post the ‘Pay by Date’. Additionally, customers shall also be levied fixed late payment charges, in subsequently generated bills until dues are cleared.
You will be charged simple interest basis of the amount borrowed and for the number of days you use it.
Example - In case you use your PayLater account balance of Rs 5,000 for 10 days, then interest will be charged on Rs 5,000 for 10 days only. This interest will be debited from the PayLater account at the end of the month.
Interest will be debited to your PayLater account on the last day of every month. You need to deposit the interest amount in your PayLater account via online transfer. In case, you have not paid the interest within three days (grace period), the Bank will recover the same by deducting it from your primary account (Savings/ Current).
A fee of Rs 199+GST will be charged on the new application.
How ICICI's PayLater facility works
In the case of ICICI Bank’s PayLater product, the account holder will get up to 45 days of zero-interest digital credit. The amount could be used towards paying bills, online shopping and paying to any merchant UPI ID instantly.
The PayLater dues will be debited automatically from your ICICI Bank Savings Account. Customers will be charged one-time activation fees of Rs 500 plus GST . A service charge of Rs.75 + applicable taxes is levied on every Rs. 3000 of monthly spent from your ICICI Bank PayLater account; applicable on monthly spend of Rs.3000 & above. Customers will be charged penal interest based on the daily total outstanding post the ‘Pay by Date’. Additionally, customers shall also be levied fixed late payment charges, in subsequently generated bills until dues cleared.
Point to note: PayLater cannot be used for making Credit Card payments, or to transfer funds to other bank accounts or do any person-to-person funds transfer.
Currently, banks require several documents before issuing credit cards, which is why a large section of society gets excluded from accessing credit using credit cards.
Pre-approved credit lines will help small borrowers and small-scale businessmen as the lending bank requires basic verification of personal accounts before providing them with a line of credit for UPI.
