Unlocking UPI’s Potential: Making Payments Without Account Balance
The Unified Payments Interface (UPI) has become an integral part of our daily financial transactions, offering a quick and hassle-free way to make payments when coupled with online banking. However, until recently, UPI transactions required a sufficient balance in the linked bank account or UPI wallet. A recent development by the Reserve Bank of India (RBI) has expanded the horizons of UPI payments, allowing transactions to occur even when the account balance is insufficient.
RBI’s Game-Changing Expansion of UPI Payments
Many individuals and businesses have embraced UPI payments due to their user-friendly and efficient nature. However, the requirement of maintaining a minimum balance in the linked account often posed limitations. On September 4th, the RBI issued a circular that marked a significant shift in the UPI landscape. The circular expanded the scope of UPI payments, enabling transactions involving pre-approved credit lines at banks. According to the RBI’s announcement, “This facility allows payments through a pre-approved credit line issued by a Scheduled Commercial Bank to individuals, with the customer’s prior consent.”
Empowering Users with UPI Pay Later
Banks now have the authority to set the terms and conditions governing the usage of these credit lines. This includes defining credit limits, credit durations, interest rates, and more. The introduction of the UPI Pay Later feature by leading banks like HDFC and ICICI has further empowered users to make payments even when their account balances fall short.
How UPI Pay Later Works
The UPI Pay Later feature enables users to spend from pre-approved credit lines and settle their dues via UPI transactions at a later date. HDFC Bank’s UPI Now Pay Later and ICICI Bank’s Pay Later are pioneering this functionality, making it compatible with popular UPI apps like Google Pay, Paytm, and PhonePe.
Here’s a simplified breakdown of how it operates: After obtaining the user’s consent, the bank establishes a credit line with a predefined credit ceiling. Users can then utilize this credit and are obligated to repay the borrowed amount within a specified timeframe.
HDFC’s ‘UPI Now Pay Later’ and ICICI’s Pay Later
HDFC Bank’s ‘UPI Now Pay Later’ initiative is exclusively available to HDFC Bank account holders and compatible with all UPI apps. Users can enjoy a credit limit of up to ₹50,000, with a maximum credit tenure of 6 months.
The ICICI Pay Later feature offers users instant digital credit for up to 45 days, allowing them to cover expenses, shop online, and make payments to any merchant with a UPI ID. ICICI Bank’s fee structure for this service includes a one-time activation fee of Rs. 500 plus GST, along with a service fee of Rs. 75 plus applicable taxes for every Rs. 3,000 spent from the ICICI Bank PayLater account.
