What changed
RBI inserted a new Chapter IIA into the Commercial Banks – Credit Facilities Directions, 2025. It clarifies that the prudential treatment of a credit facility linked to any payment mode (including UPI pre-sanctioned credit lines) is determined solely by the nature of the underlying credit, not the delivery channel. Banks must now explicitly include terms for such products in their credit policy and ensure compliance with all applicable regulations.
What it means for you
Banks can no longer treat UPI-linked credit lines as a separate, lightly regulated product; they must apply the same asset classification, provisioning, and exposure norms as for the underlying loan type. This ensures regulatory consistency across all credit delivery channels and prevents regulatory arbitrage. Lenders must review their product structures and credit policies to align with this directive.
What you must do
- Review all existing UPI-linked pre-sanctioned credit line products to ensure they comply with the prudential norms of the underlying credit facility.
- Update your bank's credit policy to explicitly include terms and conditions for credit facilities linked to specific payment instruments.
- Verify that only credit facilities otherwise permitted under extant regulations are offered through UPI or other payment modes.
- Train credit and product teams on the new Chapter IIA requirements to ensure consistent application across all channels.
Who it affects
All commercial banks offering UPI-linked credit lines, Credit policy and product development teams, Risk and compliance departments, Digital payments and fintech partners
Does this apply to credit cards linked to UPI?
The amendment covers any credit facility linked to a specific payment instrument, including credit cards used via UPI. The prudential treatment must follow the underlying credit card norms.
What if our bank already has a credit policy for UPI credit lines?
You must ensure that policy explicitly includes terms for such products and complies with all applicable regulatory requirements as per the new Chapter IIA.
Are non-bank lenders affected by this direction?
This direction applies to commercial banks. Non-bank lenders should refer to their respective regulatory frameworks, though similar principles may apply.