India’s payments space has been dramatically uplifted by UPI, which has become the backbone of instant, seamless payments for millions of citizens. With the introduction of credit lines on UPI, industry watchers are questioning whether this innovation may reflect UPI’s rapid success or whether it faces unique hurdles. While the UPI line of credit is one of the most interesting financial offers, it is debatable whether it would reach the scale of UPI. This was the subject of a roundtable discussion organized by Mint in collaboration with Pine Labs.
What is credit limit on UPI
A key question in the financial sector is whether credit lines on UPI are just an experiment, a strategic priority for banks and fintechs, or an inevitable evolution in digital finance. The panelists brought a range of perspectives.
“It’s an inevitable development,” said Venugopal Choudhary, Pine Labs Credit+ Chief Commercial Officer. “We are witnessing a UPI-first generation. The convenience and flexibility of UPI, especially for the next generation of users, makes the credit limit on UPI not just an experiment or a priority, but an option.”
This belief was echoed by Sujeet Sinha, Chief AI Officer and Head of Payments at Sarvatra Technologies. “The tracks are laid, the appetite for digital credit is growing and the ecosystem is evolving to support it.”
Akshay Sanap, Amazon’s senior product manager, also saw the development as natural: “With the benefits and reach of UPI, credit line is the logical next step for financial services in India.”
However, not everyone agreed.
Gopal Tripathi, president and head of treasury & capital markets at Jana Small Finance Bank, identified this as a strategic priority, especially for institutions focused on inclusion and operational efficiency. “With our connection to customers, even as a small finance bank, we see this as a top priority to drive inclusion and operational efficiency,” he said.
Meanwhile, Girish Parpillewar, Business Director – Cards, Unity Small Finance Bank and Ananth Babu, Head Cards, Payments at CSB Bank described the product as evolving.
Parpillewar, drawing on his experience of various payment waves, noted, “This one is still taking shape; we’re experimenting and learning.” Babu added that this is a rapidly evolving space and quite a few use cases have emerged.
What hinders credit limit on UPI?
Despite the optimism, adoption of credit lines on UPI faces real limitations. The conversation quickly turned to what was holding the product back—risk, readiness, or economics.
Babu emphasized the combination of preparedness and willingness to take risks that lenders must have: “As a lender, you will need alternative data and you must be willing to experiment on the margins.”
Emphasizing the complexity of underwriting, Parpillewar said, “Risk is the biggest challenge. How do you underwrite a borrower in real time, especially with little or no credit history? Until the banks figure this out, it’s going to be a big problem.”
For Tripathi, user-side economics were a primary concern: “Many potential users don’t have smartphones, so they may need to get a first line of credit to help them get one. Lowering operational costs through digital checkout is also critical.”
Sanap agreed that there are both economics and risk at play: “Existing credit instruments have larger ticket sizes. With UPI, we are looking at much smaller amounts, which raises the question of whether the economics work.”
Sinha attributed the risk to product retention: “Unsecured loans have come under stress in recent years. Traditional underwriting doesn’t fit this product. We need new methods in real time. The operational and credit cost structure is leaner than credit cards, but the risk remains.”
Choudhary summed up the state of the industry: “We’re still finding the right balance. The industry is evolving in understanding risk, preparedness and economic viability. The tools are there, but the answers are still emerging.”
Parpillewar added that data readiness is limited: “The reach of account aggregators is limited. This technology is only ‘ready’ for digital customers. Financial literacy and broader integration are needed.”
Is the technology ready for mass operation?
With the introduction of digital colleges, the question arises: Is technology still an obstacle, or have we moved on to other challenges?
Sinha argued that the technology is already in place: “We’re ready. The basic dormitories are there and 75-80 million people have smartphones. It’s not just for the subprime segment; convenience is a universal need. It’s not just the technology that we lack, but risk appetite and innovative product design.”
Sanap agreed: “Technology is not the issue; I am concerned about risk and economics. The convenience factor is proven, as with RuPay credit cards.”
Pointing to generational shifts, Choudhary said, “The next generation is UPI-first. If we can package lines of credit with credit card features – cashback, rewards, lifestyle benefits – why wouldn’t that work?”
What is a tipping point?
Profitability is the overriding concern – can high-volume lending of small tickets be viable on a large scale? The panelists weighed in.
Sinha likened the economics of the product to discount brokerage: “Credit on UPI is a ‘Zerodha’ type of product. Opex does not grow exponentially with scale. It is tech-intensive initially but becomes efficient over time. AI-driven real-time underwriting is the future.”
Meanwhile, Babu further explored the economics: “Small-ticket loans, high-speed loans have high distribution costs, but the UPI rail and QR acceptance infrastructure can be leveraged effectively. Banks offer products that are not profitable on a stand-alone basis, but these products help build customer retention and franchise value.”
Sanap provided a reality check on the current economy: “The average ticket size in UPI is ₹200–500. The current transaction volume cannot offset the cost.”
Tripathi emphasized patience: “The launch is still in process. We are all scaling. The product needs time to mature.”
Emphasizing supply constraints, Parpillewar said: “Supply is an issue – there are few issuers in the market. Until more banks get involved, scale and profitability will remain distant.”
Can Credit Line on UPI replace credit cards?
With the rapid rise of UPI, is it likely that UPI lines of credit could eventually make credit cards redundant? With Gen Z in particular not even pulling out their wallets anymore and opting to use their phone apps for most transactions, this is a very real possibility.
Taking his stance, Choudhary predicted, “In ten years, banks may stop issuing credit cards. Everything could shift to UPI lines of credit, which are more convenient and customizable.”
Tripathi saw more immediate operational benefits and believed that “UPI CL will immediately reduce operational costs. It is transformational for microfinance institutions.”
Babu was more cautious: “I don’t think parity with credit cards will be possible anytime soon. CL on UPI is an evolving product with its own economics. With the provision of interest-free periods, entry fees, penalty charges etc, they will be important sources of revenue.”
Revenue Model: Where’s the Money?
As with any credit product, sustainability depends on a viable revenue model. The panel discussed how banks and fintechs can make money.
Tripathi was very clear: “Interest is a must for the lines used. The revolving credit structure makes it sustainable for the banks.”
Identifying innovation opportunities, Sanap said: “Risk-based pricing is an opportunity for innovation. Consumers are willing to pay for value, not just low prices.”
Choudhary suggested that a political nudge could help: “If the RBI allows MDR for credit lines on UPI, the product immediately becomes more attractive. A tiered system, quite like the first-class and general sections – could solve the economy.”
Guardrails and systemic risk
As credit lines expand, so does systemic risk. The discussion turned to how providers can mitigate fraud and default.
Sinha emphasized the importance of evolving fraud and risk management: “Underwriting must evolve to cover pre-event, during-event and post-event risks. AI and behavioral data are the way forward, but fraud will always be a moving target.”
Tripathi added that digital rails help: “Segmented usage and purpose-specific credit lines can act as guardrails. End-use tracking and transaction limits are easier with digital rails like UPI than with traditional credit products.”
To which Choudhary commented, “Digital products are designed to allow for more dynamic and detailed control than physical products. Real-time monitoring and control will be easier and more efficient.”
Sanap advocated for new underwriting models: “Guardrails for CL on UPI must shift from salary-based underwriting to transaction history and behavioral models.”
Who will benefit first?
The full potential of CL on UPI will only be realized when it meaningfully serves new segments and use cases.
Babu outlined the likely adoption path: “Initial phase: pre-approved lines for existing customers. Next: Using alternative data for real-time underwriting and financial verification. Over time, deeper penetration into SMEs and new lending customers.”
Commenting on the value of the platform’s data, Parpillewar said, “Alternative data from platforms like Amazon or NPCI’s UPI transactions is a goldmine. If shared, it could revolutionize underwriting and customer targeting.”
Tripathi predicted a wider reach as smartphones become more affordable, “As the affordability of smartphones increases, the target segment will expand. The inflection point is close – once it’s reached, mass adoption will follow.”
Who Drives Adoption: Banks, NBFCs or Fintechs?
To scale CL to UPI, collaboration across the financial ecosystem is essential.
On this issue, Babu emphasized that banks will remain central, but also stressed the importance of user experience. “Banks are the engine, but UI/UX and the business ecosystem are critical. Adoption depends on a seamless customer experience and merchant buy-in.”
Sinha emphasized the need for agility: “Banks alone cannot drive this. NBFCs and fintechs have the agility needed to scale quickly. If the regulator opens up, adoption will accelerate.”
Anticipating synergy, Choudhary called for increased collaboration: “This is a collaboration game. Banks, NBFCs and fintechs need to work together to deliver scale, innovation and reach.”
Is CL on UPI really for the underserved?
Financial inclusion remains the holy grail of the industry. The panel discussed whether CL on UPI can bridge the gap for Indian subordinates.
The basic question that came up was: We tried everything for financial inclusion: microfinance, self-help groups, bank correspondents. Can CL on UPI finally bridge the gap, especially for micro-entrepreneurs – like a tea vendor who doesn’t own a smartphone and can therefore accept digital payments but not make them.
Choudhary remained optimistic: “The design is inherently more inclusive. With more rails and lower costs, we can reach segments beyond traditional credit card users.”
Tripathi agreed: “End-use monitoring and targeted product design will allow us to responsibly serve new customers.”
Key things
- UPI lines of credit could be a game-changer for digital finance in India, but they face hurdles like risk assessment and economic viability.
- Collaboration between banks, fintechs and NBFCs is essential to scale the adoption of credit lines on UPI.
- Understanding customer behavior and use of technology will be critical to addressing risk and promoting financial inclusion.
