NPCI Plans to Introduce EMI Option on UPI Payments to Boost Digital Lending

According to reports, the National Payments Corporation of India (NPCI) is working on enabling customers to convert their payments into EMIs in an effort to further boost the adoption of the Unified Payments Interface (UPI).

According to the Economic Times, the payments authority will permit fintech firms to incorporate the capability that enables consumers to convert their UPI payments into EMIs. As per the report, the capability would be comparable to card payments made at PoS terminals. Interestingly, the NPCI already offers two UPI credit products: RuPay credit cards and UPI credit lines.

Commented on the development, Rohit Pateria, Founder & CEO, Lark Finserv stated, “NPCI’s initiative to enable EMI on UPI is a transformative step that will democratize access to credit at the point of digital payment. By allowing consumers to instantly convert their UPI payments into manageable monthly instalments, this innovation is set to deepen financial inclusion, empower merchants with higher sales, and expand the credit ecosystem within India’s most widely used payment platform. It marks a pivotal evolution from a payment system to a comprehensive credit network, fostering sustainable growth in the digital economy.”

“Currently, UPI handles approximately 20 billion transactions monthly, with an active user base of 250-300 million. The ability for these millions of users to convert their UPI payments into EMIs at the point of sale, similar to how credit card EMIs work, will be greatly beneficial for the credit industry. This will impact individuals and MSME businesses who may not possess a credit card. For instance, or a family making a high-value appliance purchase could now opt for EMI through their UPI app by simply scanning a QR code, without needing additional paperwork. Similarly, a small vendor could offer their regularcustomers the option to pay in instalments, thereby improving cash flow for both parties. This can position UPI as an important credit tool for micro and small enterprises,” said Dipal Dutta, CEO & Founder- RedoQ.

How UPI Credit Line Works?

In 2023, the UPI credit line feature was introduced. It enables banks to provide pre-approved credit lines to consumers and small enterprises, which can then be used for UPI transactions.

The credit line on UPI service is currently available from several finance businesses, including Paytm and PhonePe. Actually, just week ago Paytm reintroduced its BNPL offering as a UPI credit line. In the meanwhile, in 2022, the RuPay credit card for UPI was introduced.

Many startups are now pushing the feature, which is widely used. In order to mainstream UPI-linked credit cards, Kiwi raised INR 208.5 Cr (about $24 million) last month.

Expanding Network of UPI

Earlier this year, Dilip Asbe, MD and CEO of NPCI, stated that the RuPay network handled about 16% of all credit card transactions in India. According to Asbe, UPI was used to process about half of these credit card transactions.

The introduction of the EMI function for UPI payments is anticipated to fuel UPI’s upcoming growth phase and bring the NPCI one step closer to its goal of 100 billion UPI transactions per month.

In August, UPI transactions reached a new all-time high of 20.01 billion, up 2.8% month over month. This represented a 34% YoY increase. Compared to INR 25.08 Lakh Cr in July, the value of UPI transactions in August was INR 24.85 Lakh Cr.